Posted by David Ige on Mon, Aug 02, 2010 @ 03:01 PM
Commerce Secretary Gary Locke (the first Chinese-American governor and Commerce Secretary in the US)
One good thing about our new administration is that they are putting more effort than previous administrations into promoting exports from the U.S.
According to Commerce Secretary Gary Locke, it has become a “full- time preoccupation instead of the part time focus it has garnered in the past”.
Exports during the first quarter of this year rose 17% from the same period last year. What is actually happening is that the Commerce Dept is helping to facilitate credit, connect U.S. Companies with overseas buyers, guide exporters through all of the learning curves towards knowing the rules of foreign countries and negotiate away trade barriers.
It is apparent that even though the U.S. Economy is sluggish, the world economy as a whole is seeing some improvement. So let’s face it, as long as there is people in this world that have money, they will for the most part consume. Which is one reason why the Logistics business continues to grow regardless of economic downturns. So when we have a president that promises to “double our exports in 5 years”, I for one would say this is one of those promises that will be kept. The Obama administration is also working to keep the Doha Round talks open by advancing negotiations on a Trans-Pacific Partnership Agreement with seven other countries and working to resolve issues that have stalled implementation of a free trade agreement with World Trade by all modes of transportation (Sea, Air ,Land) are forecast to grow 8.1 % in ’10 and 6.9% in ’11. This after a 7.2 % decline in ’09. This is according to the latest forecast from HIS Global Insight’s World Trade Service. The containerized cargo volume specifically is forecast to grow 10.6% over the coming two years. One of the big reasons is because importers from ASIA in the U.S. and Europe held back in ’09 because of the dramatic slowdown globally had drastic depletions of inventory this year and had to scramble to get all of those imports flowing again. It reminds me of a famous quote “If you want to be successful, observe the masses and do the opposite”. So any importer that kept healthy inventories in the past 12 months was definitely ahead of the pack. Obviously a difficult balancing act if you have low customer orders or poor cashflow. Nevertheless, the cargo volume is expected to produce banner years for Ocean Freight Container Carriers worldwide in the coming two years. Statistics also show that bulk shipping are also increasing after a poor year in ‘09
In regards to exports into China, the problem is that they still maintains several policies including state-sponsored subsidies that have the goal of investment, exports, and employment. Those policies have a direct role in increasing the U.S.-China trade imbalance and negatively affect our domestically based manufacturers, service providers, and farmers. When China became a member of the World Trade Organization in ‘01, everybody was saying that this was a new age of opportunity and would expand market opportunities for U.S. companies. Unfortunately, China continues to follow a policy of export-led growth to build up its own manufacturing base at the expense of everybody else. About 60 % of China’s exports come not from Chinese firms, but from foreign-invested enterprises. Many of these companies set up operations hoping to sell to the Chinese market, only to find a web of red tape that limits their opportunities, and instead pushes them to export their products back to their home countries. As of now, China is not showing any signs of changing their policies. China has also provided massive subsidies to its companies to give them an advantage over American farmers, labor, and businesses trying to sell their products to China, as well as flooding our market with their products. However many subsidies have been cancelled in the past few years, so at least we are seeing China bend to the pressure of the U.S. and the rest of the WTO.
Trade statistics released July 13 by the Dept. of Commerce show that the monthly goods and services trade rose $2 Billion in May to $42.3 Billion. Exports rose $3.5 Billion from April to $152.3 billion while imports climbed $5.5 billion to $194.5 billion. That’s a $26.4 Billion gain over this time last year (21%), and imports were up $43.8 billion (29.1%) from this time last year.
So while exports are up, imports are still climbing faster. But once the inventory is in around Oct-Nov, and the nation holds its breath to see if consumers will not only spend for Christmas, but get jobs, if the economy doesn’t have a sustainable recovery, imports will go down dramatically, especially with the ridiculously high freight rates on the eastbound trade lanes in the Pacific Rim where they are. Eventually companies in this country are going to find a way to be competitive with China with or without the U.S. Governments help, thankfully more likely with. Because that is what Americans do, we innovate, we fight, we lead. What I have noticed about our culture even with all of its faults is that we have a certain ability to influence other cultures whereby they want to emulate us. This can be and is often a negative occurrence, however when we do business in countries like China who see us first as an opponent, and learn their ways, and teach them what we know, a magical thing happens when we see progress in a social environment that was once plagued through decades , or centuries of oppression, being slowly transforms not only into a vibrant community where people have jobs, knowledge and hope but also relationships with Americans that are based upon trust and true friendships. I say all that to say, if we are going to break through the wall of China and truly do business with their culture where they are buying our goods, we have to play upon our strengths and immerse oneself into the local Chinese culture.
Devin Burke
Universal Cargo Management CEO
Posted by David Ige on Fri, Jul 16, 2010 @ 12:45 PM
As we see the writing on the wall, CHINA will re evaluate their RMB relatively soon, we just don’t know how soon. In fact China (the People’s Bank) went so far as to claim in it’s statement that “the basis for a large-scale appreciation of the RMB exchange rate does NOT exist”. (Are they still smoking Opium ?) Don’t forget even with all of this surging growth in China, they are still at best 50% unemployed. A slight dichotomy to say the least. That is because there is all of those hundreds of millions of former government subsidized farmers still out of work. Behind the veil of prosperity lies the seeds of a real cultural revolution. A society abandoned by it’s self serving (another word for communism-socialism) government long ago.
So if the RMB goes to say 5 per $1.00, what happens to that percentage of the existing employed that gets their walking papers in the urban communities where all of the factories will be shut down and moved into central China, where they are moving anyways ?
I would say China has quite a delicate time bomb on their hands. But they will eventually figure out how to create more jobs while inspiring their own half a billion middle class (with a savings rate of 34%) to spend more once their currency gets strengthened, and feel like the wealthy people they so desire to become. (Mao Tse Tung would be turning in his grave) when that happens get ready for an emergence of a new world superpower.
But an even larger factor holding China back is the People’s Bank , the very body behind China’s exchange rate policy, is currently stuck in U.S. Treasury bonds to the tune of $2 trillion. Although China would love to create a new wave of appreciation in the Euro, Gold, Steel, etc and get a better return on their reserves, they have their hands tied to a sluggish recession in the U.S., which is the backbone of the China economy. You take away the power of the American consumer that borrows and borrows so it can spend and spend, you break the back of China’s biggest customer.
So with the Obama administration and other world superpowers pushing hard on China and calling it a “currency manipulator”, the most obvious reason China has made it’s recent overtures to re evaluation is to inspire goodwill ahead of the upcoming G-20 Summit.
So bottom line here is that China is continuing to be very shrewd with buying time to see where they can move some of their reserves, inspire confidence in with the “ Old Money Club”, wait for the U.S. to get stronger, deal with this Oil spill and eventually move one step closer to being the guys running the show.
In the meantime us Americans need to think what do we have, or what can we produce that China will if not right now, eventually need ? Because deep down inside the Chinese admire and want to emulate our backbone of honor, pride , integrity and ingenuity that is ingrained in the people of this great country while China’s honor is all about “saving face”.
Devin T. Burke
CEO, Universal Cargo Management
Posted by Mark McAlister on Fri, Jun 04, 2010 @ 05:24 PM
- U.S. and China Continue to Arm Wrestle
Recently U.S. govt and Chinese govt officials met for the Strategic and Economic Dialogue (S&ED) talks for another round with the indigenous innovation issues.This involves China’s desire to develop and export more “High end” technology and compete with the U.S. WHERE WE RULE and will hopefully continue if our education system ever gets back on track, but I digress. While China's government continues to drag their feet in making it harder for copycats to steal our technologies. However score this round to the U.S. for not only getting China to be more flexible about this issue, but they are now willing to “rewrite” the contract for being in the WTO when they all sit down next month.
The other issue would be on what exactly does China plan to do with their currency evaluation?
If you are in the business if import or international shipping you are most likely crossing your fingers and telling the Obama administration to “shut the hell up”, or if you are an exporter, or a U.S. manufacturer you are screaming at the top of your lungs “ADJUST THE YUAN EXCHANGE RATE to reflect the Market” so America can rebuild it’s competitiveness on the World market for it’s goods and services. Either way, it appears as China is not only becoming a consumer market on the world’s stage, but also slowly moving towards a higher end technology (like what happened to Japan in the ‘80’s and Taiwan in the ‘90’s) they realize that it is inevitable that the RMB strengthens another 10-15% in the coming year. China is just biding their time, while the U.S. keeps nudging them along. So America, it’s time to get your thinking cap on and get back to the workshop and innovate. (That and maybe buy a few RMB along the way maybe)