| OPINION
How Has World Economy Changed Since 2008?
On September 15, 2008, Lehman Brothers filed for bankruptcy protection, a sign of the escalation of the U.S. subprime crisis toward a global financial crisis. Now, the world economy is stepping out of crisis and marching toward recovery. Five years after the crisis roiled the world, in what ways has the global economy changed?
Five years ago, the global economic growth rate stood at 2.81 percent, while it will be 3.1 percent this year (all data for 2013 are predicted numbers). The growth rate for developed economies was 0.07 percent in 2008 and will be 1.2 percent in 2013, and the growth for emerging economies was 6.09 percent in 2008 and with a prediction of 5 percent for 2013.
Five years ago, the yields for 10-year Treasury bonds in the United States, Europe and Japan were 3.72 percent, 4.19 percent and 1.54 percent, respectively, while the number declines to the current 2.91 percent, 2.05 percent and 0.73 percent, respectively. In 2008, 80 out of the top 100 banks selected by The Banker were from developed countries and only 20 from emerging economies. Five years later, 72 are from developed countries and 28 are from emerging economies. The United States had 13 banks on the 2008 list, Germany had nine and France, six, while the United States now has 16, and both Germany and France have seen their numbers drop to five a piece.
The results are not what many had imagined. More importantly, we can learn from the crisis.
First, the global economy is constantly adjusting and re-adjusting. During the past five years, emerging markets enjoyed blistering growth while developed countries were mired in trouble. The International Monetary Fund estimated the total GDP of emerging economies will approach or even outpace that of developed countries in 2013. But now, developed countries are speeding up and emerging markets are slowing down. Economic development itself is a circle, in which developed countries and emerging markets take turns to develop and to take a breath amid economic slowdowns. Only in this way can the global economy have a steady stream of growth momentum. Therefore, the current slowdown in economic growth in developing countries is not a crisis. Instead, it's a periodical need for the world economy to develop in a sustainable fashion and to improve its structures for growth. China's choice to slow down is a rational one.
Second, a crisis is a process of power reshuffling. The United States has somehow benefited from the crisis because it now has more growth momentum and more powerful banks than before, risks have been phased out of the economy and a better economic structure has taken hold. Europe is the biggest loser in the crisis, with the declining competitiveness of its banks and the plummeting status of the euro. Emerging markets edged down after peaking during the crisis. They have many flaws in the structure of their economy and their financial markets. Great development gaps exist among emerging markets. Marginalized emerging economies, such as India and Indonesia, are on the verge of breakdown.
Finally, the global financial market is on the rise in general. But some emerging markets have accumulated asset bubbles in the process. An outburst of asset bubbles in some emerging economies has caused regional financial turbulence.
Global economic recovery is a roundabout and turbulent process full of uncertainties. Therefore, we should be extremely careful. The Lehman Brothers incident indicates that a new one may be approaching us.
This is an edited excerpt of an article by Cheng Shi, a financial analyst, published in Shanghai Securities News
THE MARKETS
New IPO
A closed-door meeting on initial public offering (IPO) reform was held recently, the China Securities Journal reported on September 16.
Allotment of shares and the number of offline placements were among the topics discussed in an effort to optimize new issues pricing and protect individual investors, according to participants of the meeting, which include regulators, investment banks and academics, the report said.
The China Securities Regulatory Commission in June began soliciting public opinion on a plan to reform IPOs. The plan provides greater freedom in IPO launch timing as well as pricing of new stock issues by allowing qualified individual investors to participate in
offline placements. The plan also introduces stricter rules on the controlling investors, board directors and senior management of listed companies.
IPOs on China's Shanghai and Shenzhen stock exchanges have been suspended for nearly one year, and market expectations are growing for their resumption.
Huawei's EU Investment
Huawei, China's telecom equipment giant and a global supplier of information and communication technology (ICT), has doubled its investment in research and development (R&D) in Europe since 2010, said the company on September 13.
"We expect it will double again over the next five years," said Renato Lombardi, Vice President of Huawei's European Research Center.
"Huawei is committed to reinvesting a minimum of 10 percent of revenue in R&D every year," said Lombardi. "In 2012, we reinvested over 13 percent in R&D, one of the largest single commitments to R&D in the ICT industry by a private company," he said.
Huawei creates about 7,500 jobs in Europe, including 800 researchers in its 13 European R&D sites based in Sweden, Finland, Britain, Germany, France, Belgium, Ireland and Italy. Its first overseas laboratory was opened in 2000 in the Swedish capital of Stockholm.
NUMBERS
13.95 mln
Number of vehicle sales for Chinese carmakers from January to August 2013, up 11.81 percent year on year
40.13%
Share of domestic brands in the passenger vehicle market from January to August
5.07 mln
Number of vehicle sales from the top 10 carmakers from January to August, accounting for 66.94 percent of the total
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