1 Global investors brace for China crash (Heather
Stewart in The Guardian) Global investors will suck capital out of emerging
economies this year for the first time since 1988, as they brace themselves for
a Chinese crash, according to the Institute of International Finance.
Capital flooded into promising emerging economies in
the years that followed the global financial crisis of 2008-09, as investors
bet that rapid expansion in countries such as Turkey and Brazil could help to
offset stodgy growth in the debt-burdened US, Europe and Japan.
But with domestic investors in these and other
emerging markets squirrelling their money overseas, at the same time as
international investors calculate the costs of a sharp downturn in Chinese
growth, the IIF, which represents the world’s financial industry, said: “We now
expect that net capital flows to emerging markets in 2015 will be negative for
the first time since 1988.”
Unlike in 2008-09, when capital flows to emerging
markets plunged abruptly as a result of the US sub-prime mortgage crisis, the
IIF’s analysts say the current reversal is the latest wave of a homegrown
downturn. The IIF expects “only a moderate rebound” in 2016, as expectations
for growth in emerging economies remain weak.
“The slump in private capital inflows is most
dramatic for China,” the institute says. “Slowing growth due to excess
industrial capacity, correction in the property sector and export weakness,
together with monetary easing and the stock market bust have discouraged
inflows.”
This warning echoed a one from the International
Monetary Fund last week, that rising US interest rates could unleash a new
financial crisis, as firms in emerging economies find themselves unable to
service their debts.
2 Saudi Arabia faces change as oil wealth dwindles (AP/Yahoo
News) At a gas station in Saudi Arabia's second largest city of Jiddah, drivers
are fueling up their cars at just 45 cents a gallon — four times less than the
price of water. To make that possible, the kingdom spends up to $10.7 billion
per year on gasoline subsidies.
It also offers a range of perks and welfare support
to its citizens such as free healthcare and education, including thousands of
scholarships to expensive Western universities. Such largesse, however, is
likely to be rolled back as the world's largest oil exporter looks to curb
spending for the first time in years due to a plunge in the price of crude,
which accounts for 90 percent of government revenue.
While the country's $656 billion in currency
reserves will help it avoid a brutal shift in lifestyles and policies, the
kingdom is starting to be more careful with its finances. That will likely mean
less investment in new infrastructure projects but also possibly, down the line,
less welfare spending, smaller wage increases, and less construction of
much-needed housing and roads.
Saudi Arabia starts losing money when the price of
oil drops below $70 a barrel, experts say. If the price hovers around the
current level of about $50 a barrel, the country can continue spending at its
current pace until 2020. "That's when things get bad," said Karen
Young, a senior resident scholar at the Arab Gulf States Institute in
Washington DC.
Alternatively, it can start cutting spending on
infrastructure now to free up money for social welfare for another 30 years or
so. Many Saudis are already complaining on social media that salaries, which
sometimes average just $300 a month, are not enough to cover basic costs of
living. Housing is out of reach for many.
Young couples are also finding it harder to marry
due to the high cost of dowries and apartments, both prerequisites for a
traditional marriage. Dowries and wedding celebrations can cost tens of
thousands of dollars. One sign that times are changing is the largely debt-free
Saudi government is issuing bonds to ensure it has a steady supply of cash.
Fahad Alturki, chief economist at Saudi-based Jadwa Investment, estimates the
kingdom will issue as much as $53.5 billion in debt through next year.
3 More professionals turning freelancers (Kia Croom
in San Francisco Chronicle) Freelance work is on the rise, according to the
Bureau of Labor Statistics, which reports more than 15.5 million people in the
US are self-employed and working independent contractors.
The Bureau anticipates that by 2020 more than 40
percent of American workers (60 million people) will follow suit. Workers
across the country are leaving and even turning down corporate jobs to become
entrepreneurs.
A Harvard Business Review report from 2012 cites
growing employee dissatisfaction and the removal of barriers that once made
independent contracting challenging. New online marketplaces are making it
easier for consultants to find work. Additionally, contractors are finding jobs
that permit them to work remotely. Plus, companies are seeking contractors with
competitively priced fees for services.
The rise of co-working spaces has also proven to be
a catalyst for freelancing. Contractors are turning to co-working spaces like
WeWork for office spaces and small business development resources.
While self-employment comes with perks, such as
flexibility, contractors are often challenged with business development or
“finding work.” In a recent survey by Contently 35 percent of respondents said
the single most challenging aspect of being self-employed is securing work.
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