Sunday, September 13, 2015
New signs of China slowdown; Brics collapse and the almighty dollar is back; Tim Cook's coming of age
1 New signs of China slowdown (BBC) Growth in China's investment and factory output in August has come in below forecasts, in a further indication that the world's second-largest economy is losing steam. Factory output grew by 6.1% from the year before - below forecasts of 6.4%. Growth in fixed-asset investment - largely property - slowed to 10.9% for the year-to-date, a 15-year low.
Growing evidence that the world's economic powerhouse is slowing down has caused major investment market falls. Other indications that the economy is weakening can be seen in falling car sales and lower imports and inflation. Chinese manufacturers cut prices at their fastest pace in six years, largely on the back of a drop in commodity prices, which have dropped sharply over the past year as demand from China faltered.
China has already cut interest rates five times since November to encourage lending and spur economic activity, along with other measures to boost growth. Premier Li Keqiang pledged that China would take more steps to boost domestic demand and that it would implement more policies designed to lift imports.
China recently revised down its 2014 growth figures from 7.4% to 7.3% - its weakest showing in nearly 25 years. For this year, the government is targeting annual economic growth of about 7%. China's industrial economy is dominated by 111 conglomerates which are state owned.
2 Brics collapse and the almighty dollar is back (The Guardian) Brazil, which saw its credit rating downgraded to junk last week, is only the latest Brics economy to crumble in the face of a strong dollar, a global trade slowdown and the prospect of higher US interest rates.
Russia is already in recession; many economists believe China is heading towards a “hard landing”; and South Africa, which managed to append itself to the emerging-markets club in 2010, is on the brink of recession. Of the group once identified as the shining economic beacons of the future, only India has so far remained relatively insulated.
It wasn’t supposed to be like this. In 2009, as the rich western countries were surveying the chaos wrought by the financial-market crisis, China was cranking up an immense fiscal stimulus programme to boost demand and kickstart growth. “Decoupling” became fashionable. But seven years on from the collapse of Lehman Brothers, the chaos wrought across financial markets in emerging countries by the prospect of a rise in US interest rates is a reminder of how closely tied the Brics economies remain to the world’s biggest economy, and vice versa.
Today, the twin threats of a strong dollar – driven by the prospect of central bankers lifting interest rates in the relatively strong US economy and a sharp slowdown in Chinese growth – have sent emerging-market currencies plunging. The fallout goes well beyond Brazil, which has pegged its fortunes closely to serving Chinese demand, and Russia, which has been hit by the oil price crash. It is being felt in a swath of other countries, from South Africa to Turkey.
China has long wanted to dislodge America’s crown as the uncontested hegemon of the global economy. If, as Willem Buiter, chief global economist at Citigroup, predicted last week, China is leading the world into recession, it will underscore its weight in the 21st century world economy – but not in quite the way that Beijing might have been hoping.
3 Tim Cook’s coming of age (Madhumita Murgia in Sydney Morning Herald/Daily Telegraph) When Apple revealed its new, giant iPad Pro with a special accessory called Apple Pencil on Thursday, the crowd in the San Francisco audibly tittered.
The reason? The $99 accessory is not a revolutionary new invention - it's just a fancy stylus, an electronic pointer of the kind abhorred by Apple's former, much-loved chief executive Steve Jobs. The joke dates back to 2007 at the iPhone 1 launch, when Jobs famously said: "Who wants a stylus? You have to get them, put them away. You lose them. Yuck. Nobody wants a stylus."
Fast forward eight years, and it turns out Apple does want a stylus after all. Of course, the new Apple Pencil appears to be an advanced version. But it's also the symbol of a new era. It shows Apple chief executive Tim Cook's willingness to break the hard rules set down by Apple's opinionated founder - and finally emerge from Jobs' shadow.
During Apple's product launch event, Cook announced a slew of new products, with a mix of marginal and radical improvements on their predecessors. The new products announced this week aren't the first time Cook has strayed from the party line. In March, he unveiled the Apple Watch, the first completely new device created under his leadership - and designed without the input of Jobs.
We can't say yet how the new bets will play out - whether people will start buying (and wearing) Apple Watches, subscribing to Apple Music or paying with Apple Pay. But it signifies that Apple has moved forward and continues to experiment, rather than simply cultivating its existing, highly profitable range of products.
It's clear that Cook's Apple is financially healthy. Its stock has risen from a split-adjusted $54 to $110 since Jobs died, resulting in a market capitalisation north of $600 billion. The big difference between the larger-than-life Jobs and the more human Cook then is that Cook isn't wedded to a higher vision - he seems able to hear what customers are asking for, and make those products available.
At a memorial tribute for Jobs in 2011, Cook said Jobs advised him to never ask what he would do. "Just do what's right," he said. It's time for the rest of us to let go too, and stop asking: "What would Jobs do?"