08.28.08
Posted in Economic Analysis, Government Resources, China at 9:23 pm by Administrator
This year’s Olympics were a triumph for China and awakened considerable interest in this rising power. Here are a couple of great resources for you to check out on doing business in China.
Song White, who has incredible experience in doing business in China, has developed Beijing Show and Go which provides a translation aid for in Mandarin and English especially for Beijing. While you’re there, check out her regular site, White Song Books, which also has telephone cards for China. It’s certainly much cheaper than paying for the international rate for phone call from your mobile phone when you’re just calling around the corner.
“The Little Red Book of Doing Business in China” is a great book which takes sayings from Chairman Mao to understand the how and why of doing business in contemporary China. The author, Sheila Melvin, spent seven years working in China, including for the Shanghai chapter of the US-China Chamber of Commerce. This is far and away the best guide for understanding the business culture of China that I’ve come across.
Another great book to help you understand the culture and thought processes of China is “China Road, A Journey into the Future of a Rising Power” by Rob Gifford. Rob, for many years the NPR correspondent in Beijing, writes about a trip he took from Shanghai to the Kazakhstan border on one of China’s national roads. Much like the US Route 66, parts of the road have been replaced by superhighway, but like Route 66, the trip to the cities and small towns reveals the soul of the country. One of the features of the books is that it takes face on the strengths and the problems of contemporary China, including pollution, ethnic minorities and human rights. This is a great read that I recommend highly.
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08.27.08
Posted in Economic Analysis, Government Resources, Finance, Exchange Rates at 3:43 am by Administrator
If you ever lived through a period of hyper-inflation, you know the effects on an economy. Savings are lost, basic necessities become scarce and credit disappears. Ending a period of high inflation always requires major contractionary policies, policies that inevitably hit the poor and weakest members of society the hardest.
I remember one time visiting in Brazil when the prices changed from the morning to afternoon. I was completely dumfounded by the currency — there were several varieties floating around and in one case the government just added six zeros to the old currency. One curious fact that I realized is that in high inflation economies, there are no coins. The metal in the coins rapidly becomes more valuable than the currency and bad money (cheap paper bills) drives out the good (copper or even aluminum).
The New York times reported this week about the crippling effects that inflation has had on Vietnam.
The country’s fledgling stock market, which had been booming a year ago, has fallen in volume by 95 percent and is at a virtual standstill.Squeezed on all sides, people are cutting back on food, limiting travel, looking for second jobs, delaying major purchases and waiting for the cost of a wedding to go down before marrying.
More importantly, the downturn has crushed hopes for a better life.
The mood in Vietnam, after years of upward mobility, is tense, said Kim N. B. Ninh, the Asia Foundation’s country representative. “I think people are pessimistic,” she said. “You sense a tougher environment, a more restricted environment, a more pessimistic environment. It’s a moment of turmoil, I think.”
So how does the international businessperson cope with the highly inflationary atmosphere? The answer to remember that “Cash is King.”
You certainly cannot extend credit in the local currency. You also have to check that your banks will continue to extend trade finance — if conditions worsen, even respected guarantee agencies like EXIMBANK will go off cover for a country.
All transactions have to be in a stable international reserve currency — usually the US dollar. Obviously a currency hedging strategy is useless with such volatility. But even be careful of contracts in dollars backed by dollar deposits from within the country. Argentines woke up in 2002 to find that their dollar deposits were frozen –even to pay for international contracts.
Lastly, rely on your customers to figure out how to handle the inflation and resulting foreign exchange problems. Frankly in the 1990s and early 2000’s the average taxi cab driver in Buenos Aires or Sao Paulo knew more about foreign exchange strategies that all but a handful of traders in London or New York. If you work with your established customers during the down times, they will remember you when the market stabilizes again. It always does return — the question is just how long until “again” arrives.
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