China – THE Superpower of the Future?

It Is Expected That By 2050 China
Will Have The Highest GDP On The Planet

First Published Date : July 28, 2009

The four separate and disparate countries which make up the grouping known as BRIC have taken up a lot of newsprint in recent times, often with an alarmist tone. The old order certainly seems to be being shaken up a little, if not completely overturned, and it is the identity of the countries doing it which is surprising most people. Although the countries themselves are not tied by anything concrete beyond some early multilateral trade talks Brazil, Russia, India and China do all have something in common. They are all in the top ten nations of the world in terms of

population. Between them these four countries have a combined population of more than two and a half billion. In terms of percentage they are home to more than forty percent of the people in the world.

Although sizeable in terms of geographical mass and population, however, these countries with the possible exception of Russia had not, until recently, been seriously grouped in the “superpower” category by the generality of analysts. Decentralised populations, poor communications linkups and government policy were among the reasons for these countries being associated more than anything with political stricture and

grinding poverty. And while it would be hopelessly naïve to say that poverty was a thing of the past in any of the above nations, there is no denying that they have each somewhat overturned their reputations and are on target to be the most important economies in the world within a generation.

China, for its part, spent much of the 20th century with a reputation for insularity, government repression of subjects and human rights abuses.

While the country still has work to do to shake off the reputation, it is certainly opening up in comparison with the past. This is expected to continue, and may need to if China is to meet the expectation that by 2050 it will have the highest GDP on the planet, increasing from its most recent annual GDP of US$4.4million to a number higher than seventy million, twice the forecasted GDP for the expected nearest competitor, the US. What this confers on China, its government and its industries is a great deal of bargaining power. International summits without China are increasingly going to be seen as largely irrelevant, because even if a powerful group of countries wish to move the world in one direction its richest, and most populous, nation exercises powerful veto muscles.

There is no doubt that the way China moves in the coming years will have a major influence on the way the world will move. There is some question over how this will change China as a country. Money at the moment is not as evenly distributed and like India, China has a significant proportion of its population living beneath the poverty line. If its greater financial muscle results in more of the Chinese population sharing in a greater level of its wealth, then it is inevitable that China’s cultural reach will increase. Having hosted the Olympic Games in 2008, it is thought

that China will next bid to host the soccer World Cup – and with that comes greater scrutiny. Financial change is coming to China, now how will that change be reflected in the rest of it?

The sign of a recovery? Maybe not so much

Financial Update Week in UK

First Published: August 11, 2009

It is a sign of the times we are living in that more people than ever are actually sitting forward when the TV news switches to finance, as opposed to flipping the channel to find something less boring instead. With the global impact of what was, after all, a global credit crisis, people now want to know about finance. It affects jobs, housing, and after a while it has an impact on everything, from the personal to the political. This week has seen a slew of financial results emerging in the United Kingdom, one of the first countries to be hit by the “credit crunch”, and one of the bell-weather free market economies of the world. To call them a “mixed bag” would be about right…

As the week started two of the biggest banks operating in the UK announced major profits in the billions. Barclays and HSBC each raked in profits for the first six months of the year in the region of CA$5.5 million. Given that it was in the banking sector that the fire started in the UK, two of their major banks reporting such positive results early on is encouraging indeed. The sign of a recovery? Maybe not so much. The other half-year results which emerged this week seem to be somewhat more circumspect, if not downright pessimistic. Among them are some tales of woe, some tales of qualified hope, and a whole lot that can only be described as “hmmm” results.

Bad for the UK government is the news that Northern Rock, the ailing bank it took over (in the aftermath of the UK’s first run on a bank in many, many years) has posted further losses – in the region of CA$1.35 billion. How much of this loss-making is down to how the bank is being run, how much is down to the existing recession conditions and how much is down to the now tattered reputation of the Newcastle-based bank is currently hard to tell. Given that every UK taxpayer now has a stake in the bank, the financial results of Northern Rock are of interest to everyone in the country – and it would be fair to say they aren’t turning cartwheels with joy right now.

Then there is the story of Lloyds HBOS. Twenty or more years ago, there were four banks called Lloyds, TSB, Halifax and the Bank of Scotland. Then Lloyds merged with TSB to create Lloyds TSB, and Halifax and the Bank of Scotland created HBOS in the same way. After a government-backed takeover of HBOS by Lloyds TSB at the end of last year, the buoyant Lloyds TSB found that HBOS’ debt level was far greater than first thought, and this week they announced financial results which showed their first-half numbers to be in the negative margin. Time will tell how they ride out this storm, especially with the Bank of England announcing an additional £50 billion of “quantitative easing”, essentially adding new money to the economy.

India and ASEAN Sign Trade Deal

India Continues Its Endeavour

First Published: August 18, 2009

As India continues its endeavour to become one of the world’s global economic superpowers, the latest piece of good news for the country’s economists came this week when the country agreed a free trade pact with the ASEAN complex, a powerful negotiating bloc made up of ten South East Asian countries. This pact is expected to greatly strengthen India’s external trade muscle at a time when it has the eyes of the financial world upon it. Much of the talk in financial forums over the past couple of years has related to the BRIC nations – Brazil, Russia, India and China. These four countries are seen as being greatly influential to the future economic path which the world will take.

The ASEAN countries – Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam – account for much of South Asia’s wealth outside of China, Japan and North and South Korea and as partners wield a considerable amount of influence and purchasing power. By coming to an agreement with this trading bloc India has guaranteed itself the opportunity to trade with the countries without the imposition of tariffs – a major reason why many countries can struggle to make the economic impact they would wish to. With a list of natural resources that makes India a potentially very desirable trading partner, getting such agreements in place is hugely beneficial going forward.

Economic strength is something that gets built over time and needs to be accumulated in the face of challenges. As such India will take some time to be up there at the top of the world’s nations by GDP, but such a time is considered to be highly likely if not certain by the world’s top economists. This is why the nations involved in ASEAN see it as important to be involved with India. A country which brings in a lot of money through international trade will be in a position to spend a lot, too. Being geographically relatively close, India and the ASEAN countries will no doubt find a lot of opportunities for trade. The other economies in the area are considered to be too strong (China, Japan and South Korea) for working as a bloc to be worth their time, or too insular (North Korea) to even consider it.

India itself is geographically in an interesting position. Its closest neighbour, Pakistan, is not one of its allies due to the history between the countries. Therefore India is likely to continue to look further afield in order to satisfy its trading potential. Also in the pipeline is a national space program which will require no small amount of materials from outside the borders of India. In this respect it will be interesting to see what shape the trading between India and ASEAN (and its other trading partners) will take in the years to come. There has never been a better time to look for a trade agreement with India, and this should be borne out when we start seeing concrete figures.

A Dawn Journal - A Top American Financial Blog

Reach Extends Beyond Canada And Gains Pan-American Recognition

First Published: August 24, 2009

Despite being based in Canada, A Dawn Journal has won the approval of one of America’s most widely recognised blogs. It is quite an achievement to be able to say that, a widely respected and admired blog recognising the best financial writing in the US, has respectfully invited A Dawn Journal to take part in its “America’s Top Financial Bloggers” campaign of recognition, highlighting posts and blogs with accurate and well-written financial content. Efinancial Blog itself states that it is looking to spotlight the web’s best financial writers, so to gain their recognition feels like no small achievement.

Although Canadian finance is the specific remit of A Dawn Journal, it is true to say that good content is recognised as such wherever it comes from. The problems currently faced by families and businesses on the North side of the border differ very little from those which the United States currently faces. However, anyone will tell you that it is harder for a Canadian to gain recognition in the United States than vice versa, and for this reason it is very gratifying to be recognised in this way. Why has this happened? Well, it would be presumptuous to assume that one knows the minds of experts, but the simplicity and truth of the financial advice posted here means it can make an impact on anyone who shares our concerns about the financial climate of the day.

Although this is a Canadian blog (and very pleased to be able to say so) it has recently been noticeable that the number of global visitors has risen recently. There can only be one reason for this: readers understand and agree with the content written here. It is timeless and transcends national borders. Although there are always going to be differences from one country to the next, our differences are not what define us – our similarities are. An interest in finance is all the more relevant and essential at the present time, as we will all have financial questions to deal with the longer the financial turmoil continues. Being able to read simple yet intelligent financial advice and information helps us all deal with the important issues and questions we face.

So it seems quite reasonable and self-explanatory that this blog is becoming a regular read for an increasing number of people not only in Canada (which is still the essential focus of the site and a hugely valued readership) but also further afield. It is not only in America that this blog is read and followed, and it is hoped that this recognition from the US financial blogging community will not be the last. Financial information and news has now become a major priority even for a number of people who would not previously have paused on the financial pages for long before turning to seemingly more interesting information. For as long as people want to read important financial stories and get a no-nonsense, measured response to the issues, A Dawn Journal will be here to fulfil a need.

Was The Global Financial Crisis a Blessing in Disguise?

Global Financial Crisis Is A Demonstrable Wake-Up Call To The World

First Published: August 28, 2009

It may not be a universally popular opinion, but there are certainly more than a few people who will tell you with a straight face that the global financial crisis had to come when it did, and moreover that it was the best thing that could have happened at the time. Most of these people will generally whisper the suggestion quietly rather than say it loud enough for a recently-unemployed eavesdropper to hear, but is there any chance that they actually have a point? Could we come out of the crisis stronger as a world, as nations and as people?

What cannot be denied is that we who live in countries where the mass media have a tendency towards hyperbole probably took longer to accept that the crisis was a very real fact. As has also recently been evidenced by the swine flu pandemic, there is a tendency after a while for people to become fundamentally skeptical about anything that they have not seen for themselves. Even now in more than one nation, there are people saying that the pandemic was exaggerated because comparatively few people have died as compared to the Black Death or Spanish flu epidemics. That it was largely due to speedy reaction from governments that we didn’t see much worse seems to slip people’s minds.

As with the pandemic, so with the crisis. Except, in this case, the symptoms worldwide came before the panic, but were largely ignored by many. Global economies fell like a house of cards, but it was not until the trickle of bad news turned into a torrent that many people realised just how bad things had got. This wasn’t just a minor bump in trade, but a crisis that would render many unemployed or bankrupt – or worse. The effects have been awful but could it be said that, given the inevitability of something like this happening, it is best that it has happened now rather than getting even further out of control?

One thing that has come out of the global financial crisis is that people have begun to see money in a more enlightened way. Before the crisis, many people saw their credit card as an extension of their financial solvency, rather than something which could very easily ruin it. There was also incredible snobbery towards people who bought things second-hand or cheaply, as conspicuous consumption reached its zenith. Now, it is almost cool to be a thrifty shopper and an assiduous saver.

There have been knock-on benefits in other ways, too. We now seem to have a tendency to recycle more. Consumption and waste are becoming watchwords for us all, which may well be a lesson that bears fruit in years to come. And yet, the fact remains that this crisis has left millions without jobs, without homes and many without hope. It cannot be said with any real measure of truth that this crisis has been a good thing. What it has been – hopefully – is a demonstrable wake-up call to the world that when someone yells “crisis!” it might be worth paying attention.