SEOUL, KOREA --- The Europe Crisis:Promoting the internalization of RMB
(Remninbi)
If Europe’s north and south split apart due to their economic crisis, deriving the benefit are the U.S. and China. With China printing too much of RMB much like the U.S. does with dollars, the internalization of RMB is speeding up its progress. And if China invests in Europe with their loads of money, the ‘RMB recycling’ can occur similar to the ‘dollar recycling. ’ During this financial crisis in Europe, the telephone loudly rings day and night in Zhongnanhai, located right next to the Forbidden City where President Hu Jin-tao resides. Sarkozy calls at dawn and Obama rings as well. China picks up the phone but remains silent. Despite the anxious and the persistent requests for investment, China sees it as not the right time yet.
China in 2012: Preventive measures for ‘internal explosion’ rather than ‘easing austerity’
The western world now has high expectations for China to ease their austerity measures.. But there is a chance that China, with foreign currency flowing in, might not reduce their deposit-reserve ratio but will raise their interest rate. Making it possible that money in countries with zero interest rates including theU.S., Europe, andJapanmight flow into China more quickly due to hopes for appreciation.
How can China prevent its financal implosion One way, would be by pumping out dollars by increasing imports. Another measure would be carrying out M&As, financing for international funds or expanding investments to foreign capital markets, all under the initiative of the government or state-owned enterprises. Up until October,Chinahas made foreign investments of USD 46.2 billion (KRW 52 trillion) in 2,733 companies of 130 countries in total. Of those, M&A accounts for 34%, amounting in USD 14.5 billion.
The craze for investment in China to return: What about us
With money piling up inChina, it is likely that the craze for investing in China will hit Korea again. Being Neighbors withChina, which is a country that is making growth at the speed of light, might be a disaster in the long run, but for the time being, it is an utmost favorable factor and a lucky break forKorea’s economy. If Korea had been relying on the U.S., Europe, or Japan, which all are now struggling, we might be facing a situation far worse than ‘Occupy Wall Street’ which is occurring in the U.S.
BecauseKoreaimports many common products from toothpicks to iPhones fromChina, we do not realize the potential purchasing power of the Chinese. While the western countries are busy sinking money inChina’s market,Koreais still hesitant.
‘Sinophobia’ can strengthen Korea
Chinais now fishing in troubled waters resulting from the financial crisis, and being treated very well internationally. But this is not fromChina’s competence, but it is at the expense of the U.S.and Europe.China surely is a great nation. But it is a ‘controversial powerhouse’ with a great number of social problems..
There are disputes over whetherChinacan become a powerhouse, taking the place of the U.S.as the world’s strongest economy.Korea, has an interest in both country’s success, but a greater interest in China’s growth as the target and source of more than one-third of its exports and imports.
Looking back at the past 30 years, China’s growth is truly amazing, but with their history of more than 2,000 years, this so called rise is not much of a surprise. One could say that a country that had reigned as the G1 for more than a thousand years has re-emerged after a 170 years of silence. If you look at the history books, is not an anomaly.
Ironically,Korea’s Sinophobia can strengthenKoreaitself. It is important to remember China is just a great country and not yet a powerhouse, and with their rich-poor gap, technological gap and urban-rural gap, the ‘controversialChina’ is an opportunity for Korea.
Do not miss out
Today’s worldwide of social unrest in developed nations results from the youth’s lack of good employment opportunities. In theU.S.andEurope, all that is needed are some 700 companies dealing in new technology such as Apple. With 700 companies like Apple, who hires 20,000 new employees a year, this could result in up to 14 million jobs per year and 42 million youth employed after 3 years.
In the financial market, Apple’s market capitalization ranks number one globally, and the top IT players of the past are collapsing one after another. In the present, traditional industries are able to maintain their competitiveness only by embracing digitalization. The time has come where only ‘swift feet a half-step ahead’ and an ‘original imagination’ that can create the non-existent will end up hitting the jackpot.
One must not miss out on any kind of trend. With all of Korea’s traditional manufacturing businesses being absorbed into the Chinese market, and even with the talks of head offices being relocated to China, there seems no point in the government calling in and scolding the heads of companies for not investing in those industries. There is only one reason why conglomerates pursue China. They have begun to look at ‘Chinaas a market.’ The power of purchase has now come to the 1.3 billion Chinese people as well as its neighboring countries.
Stocks that have survived during the financial crisis in Europe and the U.S.
Despite the collapse of stock markets in the U.S.and Europe due to the financial and budgetary crisis, there are stocks that have survived the downfall. The stock price of France’s luxurious brand Hermes made a 60% rise this year with the same rise in Estee Lauder by 43% and Burberry by 21%. These rises owe to the fact that although the American and the European consumers were not able to afford luxury brands, there were the luxury-sweep tours coming from China.
China’s ideology is as follows; spend on gathering people, gather the people, and after the people are gathered, rule with ‘food’.Chinadeclares their national goal, ‘fully and warmly feeding the people.’ From the ancient times,China has been a country that has been pursuing fact-based action rather than plain ideology. The Chinese Communist Party only seems to seek socialism on the outside, but under neath lays a backbone of capitalism. The exterior color of China might be red, but her insides are yellow.
In the year 2012, the major theme of China’s economy is not easing austerity but ‘the purchasing power.’
In the year 2012, the major topic ofChina’s economy is not easing austerity but increasing ‘purchasing power’. In China, where the government means absolute power, consumption cannot help but increase with the government campaigning for it. What exactly is China’s consumption
Simply stated it is: V1.0’ starts at home and ends with food. (住，行，衣，食); V2.0’ starts with travelling and ends at the casino. 游，钩，医，博彩); V3.0’ starts with money and ends with culture (钱，军，文）.
The domestic purchase boom that has begun in 2011 started with housing and moved to automobiles. Over 5.8 million houses and 18 million cars were the start. Next in line is fashion and food. As for the housings and the cars, the fire was first set by the government, but the flame fed themselves being fueled by marketing and new products available for the common people. Once the houses are built, home appliances are sold. Following the purchase of cars are dressing up and dining out. This is ‘China’s consumption V1.0.’
As we have seen in October during China’s anniversary holiday week, Chinese consumption has leapt from in bound to out bound. Overseas trips, shopping for luxury goods, medical trips for plastic surgery, and casino tours, this is China’s ‘consumption V 2.0’.Korea has the most ideal conditions for the four consuming patterns of China’s consumption 2.0. By Spending 2.7 trillion Korean won during their 2 weeks’ of holiday demonstrates the outbound purchasing power of China today. Simply put, Korean companies in sectors related to China’s tourism are being rewarded.
