The Spanish Matador takes a beating.

If only running an economy were as simple as bullfighting! Spain’s economy has come down a long way from the highs of a couple of years ago, when it drew green glances (of the envious variety) from its European neighbors. Today, Spain carries the burden of the highest unemployment in Europe at 18%, and it’s economy groping in the dark, looking for a way out of the recessionary tunnel.

The major reasons for Spain’s fall from an economically sound position to its present pathetic state, are said to be the high unemployment rate and the crash of its real estate sector. That apart, it’s tourism sector, that provides a healthy dose of foreign exchange to the economy, and large scale employment, has suffered on account of the ongoing global economic crisis, with a fall in the number of foreigners visiting Spain.

The practical truth in the maxim “the higher you go up, the harder you fall”, seems to apply to Spain’s economy just right. After registering a rocket like trajectory northwards, with a fast paced growth in the past few years, Spain’s economy has fizzled out like a burnt out rocket.

The Spanish Government, though is going through the motions of reviving the economy and putting up a brave show with the help of statistics that somehow do not appear to be strong in substance. The attributes of an economic recovery that the Spanish Government is projecting to buttress its claims, are the reduction in the shrinkage of its GDP, upward trend in consumer confidence, negative inflation, etc, in recent weeks. Whether it all adds up to an economic recovery is something only the very ambitious economic ‘experts’ would certify.

For the present, the unemployed millions of Spain, hope for a further stimulus from their Government, to keep their home fires burning.

China Shining.

Is China shining? If one were to go by the World Bank report of recent date of better than expected economic performance of China in 2009, it would appear to be so. According to the World Bank, the Chinese economy would grow at 7.2% fro 2009 as against it’s earlier forecast of 6.5% growth.

The major reason for this optimistic projection is the boost that the economy has got from the stimulus package of nearly USD 600.00 billion quickly put into place by the Chinese establishment. The stimulus package has boosted demand and off take of loans and resulted in more and more investment. Of the 600 billion dollars of the package, more than half of the money was invested in public works, boosting employment, and consumption.

The Chinese Government is banking upon active fiscal policies coupled with relaxed monetary policies to maintain the tempo of economic activity and recovery. But the Chinese Government is realistic enough to understand that unless there is an improvement in the global economic scenario, there is not much chance of the Chinese economy sustaining its growth and momentum, on account of its high dependence on export earnings.

Falling demand for Chinese goods and services in the world markets has led to a fall in consumption, and increase in unemployment and depressed wages. That is the reason why the Chinese leadership is rooting for stability and continuity of macro economic policies.

In a recent statement, the Chinese Premier, Mr. Wen Jiabao had pointed out three areas of concern on the economic front. One, the global economic situation that is yet to improve. Two, firms in China faced several operational difficulties affecting their growth, and excess capacity and production are a major concern. Third, it is going to take some time before the long-term policies initiated by the Government to take effect, and bear fruit.

Meanwhile, even China’s opponents are hoping that China would maintain it’s growth, so that the situation does not deteriorate further, and lead to a exit out of the current crisis.

China maintains growth amid global gloom.

Despite the global gloom prevailing on account of the recession, things appear to be going alright for China. With a strong central leadership at the helm, and very little opposition to its policies, it is in fact, not very surprising. However, China has beaten the prophets of doom that were only too ready and eager to downgrade China economically, if not write it off altogether.

The stimulus package of around USD 600.00 billion initiated by the astute Chinese Government to tackle the global downturn, without much fuss, seems to have done the trick, at least in the short term. It is expected to be smooth sailing for the Chinese economy in the next few quarters, while its American counterpart is still sweating profusely.

China is expected to clock a growth rate of anywhere between 7% to 9% in the current fiscal, and the forecast for 2010 does not look all that cloudy, though, the Chinese leadership itself is cautious about the future. Cut back to 2007, China had contributed nearly 20% to world economic growth, the highest for any country. Hence the combination of optimism and caution on part of the Chinese leadership.

However, the picture is not all that rosy from certain angles, though it is comfortable in comparison to the United States. For instance, China’s exports have been moving South for the last few months. And over-dependence on the stimulus package is not a healthy sign. The stimulus package resulted in record loans and investments that boosted the economic cycle. Sustained recovery in the economy is still not in sight and consumption is expected to go down in the near future. That would set in motion a chain reaction with wages and employment taking a hit.

One of the important questions now being asked is about a possible stimulus package in 2010, and what shape it would take. The Chinese establishment is on record cautioning against “excessive optimism”. Right now, however, many of the battered economies of the world would happily trade places with the Communist giant.

Contradictory signals of American economic recovery.

Is the U.S. economy on the mend? Are things looking up? Is the worst over for the American economy? If one were to go by the media reports of increased public confidence in the U.S. businesses, a reported surge in the U.S. home sales, as reported by Bloomberg, and such other reports, then it would appear that the dark clouds of recession are giving way to an emerging blue sky.

However, reports emanating from Associated Press that the U.S. Postal authorities are seriously considering the shutting down of hundreds of post offices across the country, in view of the financial distress occasioned by the falling demand for postal services, and the increasing cost of running them.

The primary blame for the predicament of the post office system is put on the Internet which has steadily weaned away consumers from using postal services, by offering a cheaper and faster way of communication via the email. Never mind the adverse affects on the users’ writing skills, the email still scores over its traditional counterpart, because of its sheer convenience. Another factor that has reportedly hit the postal services hard is the fall in the advertisement revenues.

The Government Accountability Office is seized of the matter, and has already targeted the postal services as being a ‘troubled agency’, that would necessitate major structural changes in the way it does business. All aspects of its functioning would be put under the scanner like the delivery schedules, employee remuneration, etc.

It is not known how many jobs would be eventually lost in the above exercise. One thing is for certain. American communities across the length and breadth of the country will soon wake up to a new look postal service, that has served them faithfully for well over two centuries.

China and America SAED.

Thi is the second and concluding part of the article.

Bilateral Relations: China-U.S. bilateral relations seem to be going north with several important issues, both at the bilateral level, as well as global, willy nilly driving them in consort. On the bilateral front, some of the activities lined up are an official visit to China of the United States President, the exchange of military delegations, American participation in the Shanghai World Expo in 2010, facilitation of visa procedures on either side, and restarting the dialog on the issue of human rights.

On the economic and financial side, the two sides resolved to take necessary steps to revive their domestic economies by increasing savings in the U.S. and increasing spending and consumption in China. The second important issue is to build a powerful financial system with a proper regulatory framework in place. Thirdly, to work against protectionism and towards open markets, creating more jobs, etc. And fourthly, to reform the global financial system and to take care of future crises.
Global and regional issues also took up considerable time and effort of both the countries, with both of them resolving to hold joint discussions and exchanges as required, on the issues of low carbon economy, climate changes, energy, environment, etc. Specific projects that would be pursued for fruitiion were clean, and efficient power, clean and efficient transport, clean air and forest, and wet land protection.

It is clear that the United States and China have a lot to gain from mutual co-operation and with America’s hands full in Afghanistan, and Iraq, it may not have much of a choice than to be ‘friends’ with China, much against its natural tendencies to show off its ‘muscle’ and ‘brains’.
Concluded.

China and America SAED.

You cannot thrash them all. You cannot beat them all. The strength of your opponent defines your options in dealing with him.

In his over 25 centuries old treatise, “The Art of War”, the Chinese master, Sun Tzu, had wrote:”He who wishes to fight, must first count the cost”. And quite appropriately, perhaps, the Americans seem to be following the advice of the Chinese master diligently in avoiding a confrontation with China. China is too big, and too powerful to be trifled with. And so, the American strategy toward China is predictably different from that applied to Iraq, Iran, Libya, Saudi Arabia, and so on.

Las week, the 28th of July, to be precise, a new chapter, as it were, opened in China-U.S. relations, with the successful conclusion of the first round of China-U.S. Strategic And Economic Dialog(SAED). The dialog revolved around the theme of strategic and long term issues concerning both the countries in particluar, and the rest of the world, in general. The objective of holding the dialogwas apparently to achieve a deeper understanding of each others’ views, to bring about consensus in thought and action, to increase mutual trust that follows greater understanding, to take matters forward through mutual co-operation, and give a filip to their bilateral partnership.

A pretty long list of wishes. But one which both the sides seem to be keen on achieving, at least apparently. Of course, for their own reasons. It is difficult to imagine America giving space voluntarily to Chinese ambitions for World dominance. At the same time, the U.S. may not have many options at its disposal, in dealing with China. And the current economic crisis has only made it worse. America may be slowly, but reluctantly, coming to the realization that it cannot always call the shots. And progress in these talks may result in some benefits too, especially for its beleagured industry, and banking and financial system by attracting more Chinese imports of American goods and services.
To be concluded.