China Trade
Many of us will be aware from the news media of how China’s zero COVID policy forced mass lockdowns and quarantines, to the detriment of general factory production. Since I started drafting this article, the Chinese government has started “rowing back” on its strict policies.
Although the problem is in China, which, for many of us is thousands of miles away, what they produce is consumed around the world. A typical example might be the Apple iPhone, which is produced in China by a company (ironically) headquartered in Taiwan, whose factory was shut down. As a result, the latest model of iPhone may not be on store shelves in the near future.
A trader, whom I know recently went to a trade fair in India. They told me that all prospective buyers were Westerners, clearly switching from China-based production to India-based production. China may well have lost the Western market thanks to its zero COVID policies.
Shelves in the west (particularly in the US) that once held Chinese-manufactured goods are now bare. What they will contain next year is anybody’s guess.
The above problem illustrates the dangers of relying on one market for supplying one’s goods. Yes, they were cheaper, even after taking into account the cost of shipping goods from China to the final destination market. However, it is clear now that the entire chain was built on the premise that production either could not or would not halt.
Re-shoring or near-shoring are now the new trends as stores, traders, and others scramble to replace goods formally produced in China.
What this means for China is anyone’s guess. China has now loosened restrictions (and will need to accept the resulting increase in infections and, possibly, deaths) in order to restart its economy, or it will have to persist in what could turn out to be an exercise in economic self-destruction.
Whatever happens, the results will not be pretty for China and, by extension, the rest of the world.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Customer Care, Productivity, Selling
Should Government be Dull or Revolutionary?
British politics seemed to change in 2015. As the 2016 General Elections drew near, political parties looked like they were cometing to propose revolutionary solutions to the country’s problems.
Amongst these were Brexit, the far–left socialism of the Labour Party and more experiments with the “free market“.
The problem that many politicians seem not to understand is that markets put a premium on stability. The more unstable a country, market, or political party is perceived to be, the higher the price government will have to pay to secure support. An example of this can be seen in the yields on Treasury bills (or, as they are known in the UK, “gilts“). A country, market or party perceived as more radical, risky, or unstable pays a higher price for support. If this means a higher price to fund government borrowing, this means higher interest rates and therefore lower inflation (hopefully) in the country concerned as it will need to fund that debt.
Equally, when businesses look to invest in a new country or region, they want to know that the money they put in will be safe and will reap a reward for them. This is natural – they have shareholders to please. Generally, they are also looking to the longer term as they need to recover the cost of their investment.
No surprises then that radicalism on one side means reluctance on the part of others. Investors whether they be governments or corporate are first and foremost concerned with the security of their investment. By their very nature, revolutionary fervour and radicalism are at odds with stability and security.
Take the example of communism: this is about security and stability (mainly the security and stability of the ruling elite). Anything that is seen to harm that security and stability is quickly discouraged, if necessary using force as we have seen on many occasions. The fact that Communism itself, when introduced to China, was “revolutionary” has been conveniently forgotten…
Humans also seek stability and security. During the Cold War, in 1984, I had the opportunity to study for a few months in what was then the Soviet Union. Interestingly, I had read George Orwell‘s famous 1984 which was a thinly-veiled allegory on the downside of Communism. Having been brought up on Western media’s views on the evils of Communism (and therefore by implication Soviet society) I found that the “ordinary Russians“ with whom I interacted on a daily basis during those few months were in many ways just like Westerners. They simply wanted to live their lives in peace, give their children the best opportunities they could, and get on without interference.
This perhaps explains why dodgy governments may sometimes gain or keep power. They exploit the use of force all the general apathy prevalent amongst the bulk of the population to maintain their rule. As George Carlin observed, “Governments don’t want an intelligent population because people who can think critically can’t be ruled. They want a public just smart enough to pay taxes and dumb enough to keep voting.” Even totalitarian societies (such as the former Soviet Union) have had their fair share of dissidents who are not afraid to speak out despite the threat of imprisonment (or worse). This is why they frequently target anyone seen as an “intellectual”.
In conclusion, people prefer stability. Interestingly, where they feel that stability may be going the wrong way (as with many totalitarian regimes), they start to demand revolution until a new, more acceptable, equilibrium has been achieved.
We should not be surprised if countries, industries, and individual companies go through periods of “dullness“ Punctuated by brief bouts of “revolution“ when a shakeup is deemed necessary in this case I am reminded of the words of Charles Darwin, “it is not the strongest species that survive, nor the most intelligent, but the most responsive to change“.
In conclusion, governments most likely need to remain stable )even totalitarian ones) as they will still see a degree of investment. From time to time however, revolution may be in order to move to the next phase of evolution.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Leadership, Regulation
