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Travel to any country in Latin America and you will see the visible hand of China at work: a computer manufacturing plant in Mexico, a copper mine in Peru, a football stadium in Costa Rica. In the year 2007, the thought of China in Latin America would have appeared, at best, improbable. But in a three-year stretch, China signed free trade agreements with Chile, Peru and Costa Rica, inked billions of dollars worth of deals in oil and mining projects throughout the region, and supplanted the US as Brazil’s biggest trading partner. Once almost unseen in Latin America, China’s bilateral trade has risen from $12bn in 2000 to well over $150bn today.

Given the importance of its new Asian friend, Latin Americans are rolling out the red carpets to Chinese business delegations and jumping on planes not only to Beijing but also to Shanghai, Shenzhen, and Tianjin.

Rationale Behind Chinese Investments in Latin America [...]

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A tip of the hat to the Dutch who played a valiant game and who also deserve a chance to hold the cup one day… just not today it seems.  It is Spain’s turn and as this video clearly shows, Spain is one jubilant country at the moment– economic and political woes aside.

Labor cost in China

Recently there are two labor unrest cases widely reported in China. This is uncommon as the Chinese media usually do not report such cases involving big foreign MNC in China. Besides trying to demonstrate her openness in news reporting, there could be a subtle change in mindset on how much the government could tolerate the wage abuse by employers. It is a well known fact that the local government is very accommodating to big foreign companies in their prefecture as the latter would provide labor and tax revenue. Thus many such companies could get away with labor abuse and flouting regulations.

The first case involved Foxconn where 13 suicide attempts were made and caused 10 deaths. Some employees citing to journalists that the tough management and long working hours (80 hours of overtime in a month) are the main stress they are enduring. The victims were young with average age of twenty and unlike their parents, are less tolerable to hardship, ambitious and more solitude which could be the result of the one-child policy.

With the bad publicity and customer pressure, Foxconn increased 30% on the basic monthly wage for most of its 800,000 employees in China. The production operators have their wages increased from RMB900 ($132), which is the minimum wage level, to RMB 1,200. And Foxconn is also considering providing housing allowance for 80,000 employees in its Yantai plant in Shandong province. The annual cost would amount to RMB200 million ($29.3 million).

The second case was the strike by the workers of one components manufacturing plant of Honda in southern province Guangzhou. The strike had caused four other Honda assembly plants to shut down production. Honda subsequently increased the basic wage by 24%.

There were also reports about trade unions and local communities forcing some US fast food chains to raise the workers wage to the stipulated minimum wage level in China and Hong Kong. To shun the bad publicity, many of these fast food chains have reluctantly agreed to meet the minimum wage level for their workers.

Such wage increase in Foxconn and Honda has created severe repercussion to other factories especially those at coastal provinces. The workers may demand wage increase and follow the Honda example. Labor supply at the coastal cities is already very tight and the employers have to increase wage and benefits to attract workers. One Hong Kong businessman commented on a TV news interview that 2,000 to 3,000 Hong Kong companies in Guangzhou would encounter difficulties to match the pay rise by Foxconn and Honda.

The current skyrocketing increase in property price and some inflation on food have put tremendous stress on cost of living for many Chinese. Consequently the pressure is exerting onto the government to address the issue. Without an effective curb on property price increase at the moment, the government may want to increase the income level for her citizen especially the lower income bracket to combat the rising living cost.

China may also want to sway away from a sweatshop industry which she is widely known as. The low cost merchandised goods do not seem to be appreciated by her American and European customers. Not only are the customers putting immense pressure to force China to appreciate the yuan (RMB), the local trade unions and politicians are targeting China as the culprit for their woes on unemployment and loss of competition. Thus it makes better sense for Chinese government to increase labor cost to soothe the trade friction with their US and Europe customers than to appreciate her exchange rate which will cause acute economic and political pains to the country and the people.

Many Chinese I have talked to and also from the Chinese blog websites are showing anger on those foreign countries forcing China to adhere to their demand to appreciate the yuan while insisting on low cost goods as many foreign buyers do not agree to price increase whenever there is an appreciation on the yuan. To further aggravating the situation, some countries are putting up trade barriers to fence off the competition from China. This acrimonious trade dispute will lead to further misunderstanding and hostility not only between countries but also people from both sides.

China is also embarking on her fiscal policy to spur up domestic consumption. This will reduce her reliance on export to maintain economic growth. After all she needs a balanced economic structure for sustained growth and social harmony. Unfortunately the increase in domestic consumption has met limited success other than the housing and luxury goods. Henceforth an increase in income for the masses will boost the domestic consumption.

Thus I sense the Chinese government is giving indirect consent to the trade unions to bargain for higher wages. Though the Chinese government implicitly allows the wage to increase to appease her citizens, the cost competitiveness is not lost. Many of her inland provinces are providing abundant resources and manpower to accommodate the low cost manufacturing. However the price will still be higher than what the foreign customers are accustomed to. The transfer of technologies, management knowledge and labor skills from the coastal cities to the inland industrial parks will ensure their strategic leverage and competitiveness against other low cost manufacturing countries.

This may help China to reconcile relationship with US and Europe with the slightly higher product cost. After all, an increase in domestic consumption would also increase in import too. And this will help the foreign companies to fulfill their goal to capture the immense China market.

* This entry has been published with the permission of the author, Calipe Chong of Vipo Asia.  Please visit VipoAsia to access his blog directly and read more of his insight on Asia and the world.

Not so long ago, I had read from newspapers how teenagers were treated by their parents in the East and West.

Just last month, many parents in China were almost hysterical when their child sat for the college entrance examination. They would put up at hotels next to the school so that they would not be late by the morning traffic. Reported incidents were common on rifts between motorists and parents who self-volunteered as traffic warden to stop cars from coming near school to prevent noise getting into the examination hall. Many parents would take leave from work to stay at home to coach the children and accompanying them to school. June is the most stressful month for parents with children taking “Gaokao” which is the college entrance examination.

In the West, parents do concern very much about their off-spring performance in school. They would work very hard to save enough money to see their children to have the highest education possible. However they would not act in a very protective manner like the Chinese.

Some parents even encourage their child to take up very dangerous endeavor. Young teenage girls from US, Australia and Netherland had their parent consent and encouragement to make solo sail around the globe. There is an America teenage boy attempting to be the youngest person to scale Mount Everest. He had already successfully reached many of the top peaks in the world. His parents are in full support for his courageous attempt.

Such support from parents to fulfill the dreams of their off-springs in these dangerous feats is unimaginable by the Chinese parents. My mom told me that I would always be her boy as long as I am a bachelor. I remembered how my mom told me not to go near water, road, etc for my own good when I was a child. I have seen this attitude very common in China after living here.

I see the subtle difference in upbringing between America and China. In China, the parents attempt to provide everything to the child and are very protective; while in America, the child is given more freedom to develop on his or her own. The Chinese businessmen would like the son to take over the business while the young American has the option to choose otherwise. Bill Gates does not leave all his fortune to his children. The paternal culture in China is analogous to giving fishes to the fisherman while American parent teach the son to fish.

This is a much generalized statement. I have seen some Chinese parents allowing their sons and daughters to strike out on their own while some Western parents are as protective as the Chinese parents. I am comparing the general trends that I have seen in both countries.

Another observation is how school conducts its education. In China the parent would fault the school if it does not provide sufficient homework. The Chinese education is to read more books, do more homework, remember more data and figures and score more points in examinations.

The America education, on the other hand, put less emphasis on final examination results and wanting the student to develop his or her ability. From primary schools to colleges, American students would stand in front of the class to relate their experience and insights while the Chinese students would take whatever the teachers say. Just sit there and listen. I guess that is the reason why you find the American articulating very confidently in public speeches or business presentation. If you attend a seminar dominated with Chinese audience, you will find very few raising questions. They are just not comfortable to stand up to speak.

When a Chinese has a tragedy and become paralyzed, he would expect his family members to take care of him. Many Americans having the same ill fate do not want to be treated as a handicapped person. They want to be independent and some of them have even tried to perform feats such as running hundreds of miles, swimming across the channel, scaling some heights, etc. Their perseverance and zeal are admirable.

And when it comes to mass mobilization, the Chinese outdo everyone. The precision display in its 2008 Olympics Opening performance demonstrated to the world on its militarized discipline of the soldiers and students. Few countries could match her achievement in such large scale performance.

The Chinese way of disciplining the young to follow orders and acceptance of filial piety as one own responsibility has helped to develop a harmonized society. The Confucius ideology is deep rooted in Chinese culture and has transpired the Chinese to be humble, righteous, polite and filial. The Chinese emphasizes on society (country) over self has produced many heroes and heroines against the enemy and natural disasters since ancient time. The numerous heroic acts and generosity shown two years ago in Sichuan earthquake is a classic Chinese behavior. This could not have happened without the unique Chinese upbringing.

I am not criticizing the Chinese way of upbringing nor adoring the American way. The Chinese has produced many talented scientists and engineers while the US has her problems on the rampant juvenile delinquency. There are merits and shortcomings in both systems and environments. We should learn from each other the good and discard the bad. There is something we can adopt in between from the Chinese to manage the masses and the American way of promoting individualism.

* This entry has been published with the permission of the author, Calipe Chong of Vipo Asia.  Please visit VipoAsia to access his blog directly and read more of his insight on Asia and the world.

… the image says it all.

In addition to Colombia, the article also shares data complied by Economatica on the growth of the other major stock exchanges in the region, which is what CSA will be sharing with you today.  To read the full article from the Latin Business Chronicle click here.

Colombia – Best performer in Latam last year, IGBC (Colombia’s benchmark) stock index has grown in value by 927.9% during the past 10 years, and average decline in value of transactions in 2008 was 2.3%—lower than all other countries in the region

Brazil – Latin America’s largest stock market, Ibovespa (Brazil’s benchmark) stock index has grown 301.3% during the past 10 years, and the average decline of transitions in 2008 compared with 2009 was 13.6%.

Mexico – IPC (major benchmark index in Mexico) has grown 250.5% during the past 10 years, and the average decline in transactions last year was 13.9%

Venezuela – The Caracas stock index has grown by 916.5% during the past 10 years, and the average decline in transactions was 29.5% last year—the second worst in Latin America.

Argentina – The Merval inces has grown by 321.3% during the past ten years, and had the worst average decline in transactions last year, suffering a decline of 54.4%.

Peru – The Lima stock index (IGBVL) has been one of the regions best performing in the past few years.  Seeing growth of 671.1% during the past 10 years, and a decline in average transactions last year of 21%.

Chile – Last but not least, Chile’s IPSA index has grown by 218.8% over the past 10 years, and the average decline in transactions last year was a mere 3.6%-second best next to Colombia.

Nov 12 (Reuters) – The U.N. is warning the world is on the brink of another food crisis ahead of a major international summit in Rome.

Paul Chapman reports.