Thursday, April 26, 2007

Globalisation and the Economy

Hi everyone! im back again for my 2nd post!

As we all know, music plays an important part in the lives of people of all ages all over the world. In 1997, a South Korean invented the first audio player. This audio player was further perfected into what is now known as our portable mp3 player. In the modern world, people all over the world own an mp3 player. This is due to GLOBALISATION. And so, the invention of the mp3 player has greatly impacted the economy, by boosting the economy of many countries, like China, which exports many mp3 players.

The ipod, being one of the most popular mp3 players ever created, has contributed greatly to the annual income of Apple. "The announcement revealed sales figures of 4.4 million for the iPod in its fiscal year, an increase of 370 per cent. Total income from iPod sales rose $961 million, 279 per cent, on last year."(1).

However, recently, i realised the emergence of various mp3 players of unknown brands in the market, most of which are China companies. The significance of such a situation is that those mp3 players manufactured by China companies are sold at very low prices, because of low cost price in China (This is related to my previous post). An ipod nano 4GB costs about S$348 , while mp3 players from China companies of the same storage capacity could just cost S$100. Only those brand conscious people would go for the ipod nano, but some would ask themselves: why pay so much for something of the same storage capacity? Thus, the sales of such mp3 players have increased, causing more and more companies to enter the mp3 player market. Due to competition, prices of mp3 players are forced lower and lower. For example, the 1st generation ipod nano 4GB cost the same as the 2nd generation ipod nano 8GB. " 'Compressed-audio players are coming into the mainstream as portable flash-player prices fall and capacities rise; the iPod mini and other small form-factor portable jukeboxes are introduced; and more and more devices, such as DVD players, support compressed audio as a secondary feature,' Kevorkian pointed out." (2)

There have been many articles regarding the mp3 player market exploding. According to an article, "The worldwide market for MP3 players will hit $58 billion by 2008, according to a study released on Tuesday by IDC." "The volume of flash players shipped will jump to 50 million units in 2008, up from 12.5 million in 2003. Other segments will grow modestly." (3) According to studies, the number of players shipped will increase to 50 million units in 2008, which is alot. So is the sum of $58 billion, which will definitely impact the economy of many countries.

As more and more mp3 players enter the market, companies face competition, especially from China companies as mentioned above. They are forced to lower their prices until they cannot afford to lower it anymore. This has caused many companies to withdraw from the market, either because they income is greatly decreasing, or that they forsee that they will not benefit much from the mp3 market due to competition. Companies like Dell, Benq, and Olympus have realised the sudden increase in cheap mp3 players in the market and decided to withdraw from the market. (4)

Technology has improved so much that it has created cheaper and cheaper products. Thus, I forsee that the prices of mp3 players will continue decreasing. In this article, it is seen how globalisation has led to the worldwide usage of mp3 players, causing explosion in the mp3 player market, greatly impacting the global economy. The explosion of the mp3 player market has benefitted the global economy, as well as the economy of many countries, because it has brought high income, and has increased the Gross Domestic Product of many countries. It has also brought the price of the mp3 player down, allowing consumers to get it at a low price.


(1):http://news.ipodworld.co.uk/index.php/weblog/61/
(2):http://www.newsfactor.com/perl/story/27117.html
(3):http://news.com.com/Study+MP3+player+market+to+explode/2100-1041_3-5376070.html
(4):http://www.macnn.com/articles/06/08/22/dell.concedes.defeat.again
http://www.engadget.com/2005/11/25/benq-exiting-mp3-player-market/
http://www.theregister.co.uk/2005/11/10/olympus_quits_mp3_biz/

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Wednesday, April 18, 2007

Globalisation and the Economy

Hi everyone!
Sorry for the late post, coz it was posted in the group blog but i just transferred it here.
Ok. lets start.
Globalisation has a very large impact on the economy. Exporting to other countries and importing from other countries is one of the main sources of income for countries. However, they can also be a source of problems. For example, China has been selling cheap goods in the market, causing other countries to have no market in selling their goods because of much higher cost price and more expensive labour. Recently, many countries have been unhappy about this, because it would have a negative impact on their economy. One example is the US, complaining about China having trade barriers, piracy of goods, as well as subsidising of manufactured goods.
These are the following articles:
Article 1:
http://www.nytimes.com/2007/04/10/business/worldbusiness/10trade.html
U.S. Toughens Its Position on China Trade By STEVEN R. WEISMANPublished: April 10, 2007WASHINGTON, April 9 — Has the Bush administration’s economic team run out of patience with China? Doug Mills/The New York Times
For years, President Bush has avoided confronting Beijing with sanctions or legal challenges to its trade practices, preferring to use diplomacy to press China to bring down its trade deficit with the United States, now at $232 billion. But these days, the conciliatory approach looks as if it is being reconsidered, if not discarded.
The latest in a string of tough actions against China came on Monday, when the top American trade envoy, Susan C. Schwab, announced that the United States would take China to court at the World Trade Organization over suspected trade barriers and piracy of books, music, videos and other goods.
That action came after two other unfair trade complaints earlier this year, one last month threatening stiff new duties on certain imports, and the other in February, challenging China over its subsidies of manufactured goods.
Ms. Schwab said that even though negotiations had failed to solve trade problems, the latest steps “should not be viewed as hostile actions against China” and that resolving issues at the World Trade Organization in Geneva was “the normal way for mature trading partners” to handle differences.
The new policy risks angering or embarrassing those in Beijing who may be trying to reform economic policies as Washington wants. In addition, many trade experts worry that China might retaliate against American imports or cut back on cooperation sought by Washington on other issues, like diplomatic problems involving Iran, North Korea and Sudan.
Still, the new policy was widely seen by trade specialists and industry spokesmen as necessary to send a signal not only to Beijing but also to Democrats in Congress, who plan even tougher sanctions against China if the administration does not act.
The announcement by Ms. Schwab on piracy and trade barriers brought cautious praise from an array of Democratic trade hawks, from Senators Charles E. Schumer of New York to Sherrod Brown of Ohio, who won last year in part by taking a tough line on trade. Many Republicans echoed their endorsement. All said the action was overdue and in need of follow-up.
But even those who praised the administration’s actions warned that more such efforts were needed.
“I’ve been sending letters to this administration for years urging these kinds of actions, and they’ve been ignored,” said Representative Sander Levin, Democrat of Michigan and chairman of the trade subcommittee for the House Ways and Means panel. “Obviously the pressure has been building in this new Congress.”
Within the Bush administration the new actions were defended less as a shift than a complement to the policy proclaimed by Treasury Secretary Henry M. Paulson Jr. since he took office last summer — that it is better to solve economic disputes by negotiation. But he has also warned China that it would be dangerous to ignore the restive mood in Congress.
Unlike Commerce Secretary Carlos M. Gutierrez, who praised Ms. Schwab’s announcement on Monday, Mr. Paulson issued no public statement in support of it. Aides say that as a former Goldman Sachs executive with long business experience in China, he has been reluctant to be identified with punishments or threats.
Mr. Paulson, who has visited China three times in the last six months, is the instigator of a “strategic economic dialogue” with top Beijing leaders aimed at getting them to change Chinese policies and practices over the long term. People who have talked to the secretary about trade with China say he has been taken aback by the anti-China mood in Congress.
The Treasury chief signed off on the recent steps against China, however, according to administration officials.
“What the action today means is that Paulson realizes his approach will not deliver concrete results in time to avoid the risk of serious Congressional reaction,” said C. Fred Bergsten, director of the Peterson Institute for International Economics, a policy institute in Washington.
“The problem is that the secretary’s Chinese friends have not given him much help,” Mr. Bergsten added, referring to the unwillingness or inability of Mr. Paulson’s counterparts to move on issues as quickly as Washington wants.
Mr. Paulson has tried not to get into the specifics of trade issues like subsidies, the piracy of intellectual property in software, videos and pharmaceuticals or the welter of Chinese trade barriers on American goods and financial services.
The one issue he has spoken out on the most is currency, echoing the criticism of many economists that China’s practice of buying huge amounts of dollars has kept the value of its currency, the yuan, artificially low in order to promote its own exports by making them cheaper.
But China has taken only moderate steps to allow its currency values to float on the open market. Many in the administration are known to be increasingly impatient over the lack of progress in this area.
The next test of the administration’s tough new approach will be in late May, when a delegation of Chinese officials, led by Vice Premier Wu Yi, will come to Washington for another session of the strategic dialogue started by Mr. Paulson.
It is to be a second round of the talks begun in December, when the Treasury secretary took a team of cabinet members, and Ben S. Bernanke, the Federal Reserve chairman, to push the dialogue as the best way to solve problems.
At the time, Democrats said they would pause in their plans to push for tough measures against China to give the dialogue a chance to work. Now they say it has clearly failed and the more recent escalation is welcome.
What China will do next is an open question in the administration. The answer may not be clear until Mr. Paulson’s economic meeting with the Chinese in May.
But many Chinese experts warn that the latest steps by the administration will not help persuade China to change its reliance on a low-valued currency and other restrictions on imports and investment. The power and influence of Communist Party leaders tied to the export sector is too great, they say.
“If the U.S. takes more actions against China, it will harm Paulson’s dialogue with China and future trade meetings,” said Chen Jianan, a professor of economics at Fudan University in Shanghai. But he said the most recent actions could compel both sides to negotiate.
In the meantime, China is considered likely to try to ease tensions, not by opening up its own markets, but by opening up its wallet and purchasing more American exports, whether planes or machinery or computer chips.
There are media reports in China that the leadership will announce new purchases in advance of the May meeting, just as they did before President Hu Jintao’s visit to the White House last year.
Mr. Gutierrez, the Commerce secretary, has said repeatedly that the way to reduce the trade deficit with China, which now is about a third of the total trade deficit with other countries, is to export more. But Congress is considered unlikely to be impressed by a Chinese shopping spree.
All sides agree that the latest American actions portend a period of rough weather in United States-Chinese relations.
David Barboza contributed reporting from Shanghai.
Article 2:
http://www.nytimes.com/2007/04/11/business/worldbusiness/11yuan.html?ref=worldbusiness
China Conveys ‘Regret’ Over Trade Complaints By KEITH BRADSHERPublished: April 11, 2007
HONG KONG, Wednesday, April 11 — The Chinese government expressed “deep regret and strong dissatisfaction” on Tuesday with the Bush administration’s decision to file two complaints against China with the World Trade Organization.
The American decision to complain to the W.T.O. “will seriously undermine the cooperative relations the two nations have established in the field and will adversely affect bilateral trade,” Wang Xinpei, a Commerce Ministry spokesman, said in a statement on the ministry’s Web site.
Mr. Wang’s emphasis on bilateral trade could suggest that the dispute with the United States would remain limited to trade issues, and would not necessarily spill over into areas like pressure on North Korea to abandon its nuclear weapons program.
But David Zweig, a China specialist at the Hong Kong University of Science and Technology, said that Chinese officials appeared to be worried that President Bush was losing his ability to block protectionist moves in Congress, and they were prepared to retaliate, at least on trade issues, if the United States continued to step up pressure on China.
The Chinese reaction to the trade complaints was slightly stronger than China’s statement on March 31 regarding American duties on imported paper. That statement expressed “strong dissatisfaction,” but did not mention “deep regret.”
The Bush administration announced on March 30 that it would impose duties on imports of coated paper from China to counteract what it said were government subsidies to the Chinese paper industry.
An editorial in the official China Daily newspaper on Wednesday took the toughest Chinese position yet, warning that, “In fact, actions against China could trigger an outbreak of massive protectionism that could seriously undermine global economic growth.”
The editorial described the United States as engaging “in a series of protectionist actions,” and added that, “While such protectionist moves may appeal to some U.S. industries or interest groups for a while, they do nothing to promote the restructuring the U.S. economy needs to reduce its budget and trade deficits.”
China’s customs agency released statistics Tuesday showing that Chinese exports to the rest of the world grew last month at the slowest pace in five years, rising just 6.9 percent from a year earlier. Correspondingly, the country’s trade surplus narrowed to $6.9 billion in March, from $23.8 billion in February.
But the surplus for the entire first quarter doubled from a year earlier, to $46.4 billion. And economists predicted that the surplus would continue to rise and dismissed the importance of the slowdown in March.
“So, in our view, this number will do nothing, zilch, nada, to address political concerns in the U.S. about China’s overall trade surplus,” Stephen Green, an economist in the Shanghai offices of Standard Chartered Bank, wrote in a research note.
The deceleration followed a slowdown of exports from the major Southeast Asian economies: Indonesia, Malaysia, the Philippines, Singapore and Thailand. That has prompted some in Asia to worry whether industrialized countries were losing some of their appetite for Asian goods.
But economists said that last month’s slowing of exports from China was probably temporary, a result of short-term events.
Many exporters made extra shipments in February before a threatened phase-out of certain tax rebates in China. Exporters had expected the phase-out to be broadened at the start of March to cover more products, but this has not yet happened.
The Chinese New Year also fell unusually late in February, so many factories that closed then may have had fewer goods ready for shipment in March, said Liang Hong, an economist in the Hong Kong offices of Goldman Sachs. The Chinese New Year started nearly three weeks earlier last year, so exports were stronger in March 2006.
The slowing of exports was not a result of any sudden move in the value of China’s currency. The currency, the yuan, was virtually unchanged against the dollar in March, after rising steadily through January and February.
The statistics released on Tuesday were a “flash” estimate of overall exports, imports and the trade balance that the government provides on a schedule set months in advance. It did not include figures for trade with individual countries.
Ma Jun, an economist in the Hong Kong office of Deutsche Bank, said that the bank’s monthly survey of Chinese purchasing managers had found that their incoming orders for future exports had increased faster in March than in any month since the survey began in early 2005.
Facing criticism from Congress that more should be done to address the widening United States trade deficit with China, the Bush administration announced Monday that it would file complaints with the W.T.O. The complaints, which were lodged at the organization’s headquarters in Geneva on Tuesday, accuse China of tolerating widespread violations of trademarks and copyrights and of unfairly limiting the importation of books, journals, movies, videos and music to state-owned companies.
Mr. Wang denied the American allegations, saying that “the Chinese government has always been firm in protecting intellectual property.” He added that until now, China and the United States had been “in good communication and consultation with each other over access to the Chinese publication market.”
The statement and the one on March 31 regarding coated-paper duties were both notable for citing Mr. Wang by name, instead of a more senior official. Chinese government ministries cite spokesmen and spokeswomen in most pronouncements, but sometimes cite more senior officials on issues considered to be of grave importance.
China is far more dependent on exports for economic growth than any other large country, and it has shown reluctance to be drawn into a broad dispute with the United States.
The Chinese government faces domestic pressures to not be seen as caving in to American pressure.
A steep rise in China’s currency would make Chinese exports less competitive in foreign markets and would make imports more competitive in China, so the Bush administration and many members of Congress have made this a top priority. Complaints to the world body and duties on narrow categories of American imports like coated paper tend to have a limited effect on monthly trade figures.
But senior Chinese officials are worried that a steep rise in the currency could result in job losses at factories and on farms as imports become more competitive, and that unemployed workers could become a threat to social stability.
Reflections:
The two articles are about the US complaining to the World Trade Organisation about China. China has been practicing capital control, supressing the value of the Yuan, causing the cost of raw materials to be low, labour to be cheap, and also causing locals to refrain from buying exported goods. China has also subsidised manufactured goods, allowing them to be exported to other countries. This causes other countries to be greatly disadvantaged because they have higher cost price and so cannot afford to lower the prices of their goods. Most people will go for cheaper goods, and so, the economy of these countries would be badly affected.
To counter this, the US has engaged "in a series of protectionist actions". Protectionism in an economic sense is the protection of local industries from foreigh competition through the imposing of tariffs and duties. These raise the price comsumers pay for imported goods. In this way, the price of goods from China will be greatly increased, though they might be still cheap. This can greatly decrease the number of imported goods bought by the consumers, and thus increasing the number of local goods bought by the people, benefiting the economy.
"The deceleration followed a slowdown of exports from the major Southeast Asian economies: Indonesia, Malaysia, the Philippines, Singapore and Thailand. That has prompted some in Asia to worry whether industrialized countries were losing some of their appetite for Asian goods." This paragraph tells us that the US imposing tariffs and duties can also affect the exports from asian countries, thus impacting their economies. This also shows that just one economy can impact so many other economies. In this case, the US imposing tariffs and duties has affected the economy of not only China, but other asian countries as well.
Globalisation in this case actually includes connection and interaction between countries in the form of import and export. These articles and their analysis shows how globalisation can impact the global economy.

Economic Expert Yeo Chang Long

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Hi everyone,

Sorry for the late setting up of my blog, because i had problems. Now its up, thanks to coco. Have fun reading about how globalisation has an effect on the economy!

Economic Expert Yeo Chang Long

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