Friday, January 28, 2005

China: A Startling Insight

Business World: Jan 31, 2005
In Depth-China's New Left

The magazine has come out with a new insight into the invisible effects of China's scramble to economic powerhouse status. And the simmering in the cauldron is beginning to get critical.

This is a country "caught between the two extremes of misguided socialism and crony capitalism, and suffering from the worst of both systems," says Wang Hui, a professor of literature at Beijing's Tsinghua University, whose passionate denouncements of China's market reforms are partly credited with energising China's New Left intellectuals. "We have to find an alternate way. This is the great mission of our generation."
Questions like this have led to more than 50,000 protests rocking China in the past year, for causes as diverse as cuts in social services, unpaid pensions, and
illegal demolitions. Emboldened by such tumult, Wang and other Chinese intellectuals in the New Left have stepped up their criticism of China's market reforms. Their message is simple:
China's failed 20th century experiment with communism cannot be undone in the 21st century by embracing 19th century capitalism.


And the startling reality about China's economic fundamentals and boom of exports.

"(This is a government) more focused on helping export manufacturers than agriculture and rural welfare," which affect far more people, says Cui Zhi Yuan of Tsinghua University. "The largest expenditure item in (China's) budget is not education or healthcare or even the military, but tax rebates to exporters. So essentially, the government is returning money to (domestic and multinational) exporters while cutting welfare programmes."
Such incentives have swelled China's exports to 30 per cent of its GDP, as opposed to about 15 per cent in the US and Japan. With many domestic manufacturers essentially being suppliers to exporters, some economists estimate that exports account for almost 60 per cent of China's GDP. That has brought wealth to about 300 million of China's 1.2 billion people, but it has also meant the Chinese government is less concerned with raising domestic consumption and domestic wages of the other 900 million, Cui says.


To know more, grab a copy of this Business World issue (31st Jan).

On behalf of FINAX
Abhishek Tripathi

Tuesday, January 25, 2005

Managing the banker's bank: Treasury

Bankers in emerging markets often view treasury activities that are common in the developed world—securities trading or the development of derivatives contracts, for example—as casino finance. As a result, these banks have lagged behind developed-market competitors in managing risk and creating profitable treasury units.

This thought outlines the following article that talks about the risk aversion of banks in emerging market countries and it attempts to give a dose of advice and commentary on this issue. You can not help but feel that it was high time our banks did something about this i.e. if they are already not doing it. Read the article. You will need free registration to access complete article.

On behalf of FINAX
Abhishek Tripathi

Monday, January 17, 2005

FC: In this edition

The Finance Club is an informal discussion forum started by FINAX. The objective is to get the students interested in finance to asemble and share their knowledge, opinions and curiosities with each other. The idea of letting students learn by helping each other has caught on.
The regular meets of Fin Club have been a constant source of invigoration for the sharp minds of XLRI and many a greenhorn has 'made his bones' there.

For the latest edition, the club had chosen the topic 'Mergers & Acquisitions' and the seniors helped the juniors thrash out the fine points involved viz. mergers, acquisitions, amalgamation, golden parachute, hostile takeover, swap ratio, Co-insurance etc.

On behalf of FINAX
Abhishek Tripathi

Tuesday, January 04, 2005

The Great Asian Debate

The Great Asian Debate

India and China have of late been the number one storm raisers, what with the world 's economic intelligentsia worrying itself about the difference of their approaches to growth. But the difference is only as remarkable as is the speculation about which approach will succeed in the long run. Theories are flying by like locusts in action and pages after pages are being churned on the issue. So what's the need of another essay?
A very valid question, but the answer to which can only be found in this piece of clear-cut analysis. Sample this:-
"China and India are both developing quickly but with vastly different approaches. China's growth has been driven by manufacturing, and the country's planned economy has tapped into domestic savings and foreign investment to build an impressive infrastructure. India, by contrast, owes much of its progress to private businesses. Without much assistance from the government, they serve companies in the West's knowledge-based industries, such as software, IT services, and pharmaceuticals. The difference between the two models prompts debate about whether one country has a better approach to economic development than the other and which will eventually emerge as the stronger"
To find out more about the likelihood of India drubbing China in the long run, take a scoopful of time out from your schedule and read this essay that features in the McKinsey Quarterly. You would need a free registration to read the complete article.

On behalf of FINAX
Abhishek Tripathi

Link contribution by
Akshay Gupta

From the Secretary's desk

The FINAX BLOG

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Secretary
Finax