Flashcards in Analysis of Selected Emerging Markets Deck (27)
What are the trends in FDI inflows 2005-2018?
World trade declined between 2017-2018 while developing economies increased.
Most significant decline in the US 2016-2018
China, Hong Kong and Singapore receiving greatest share of FDI flows
India will catch up with the UK in terms of their GDP due to high growth and decline in poverty
How are China and India dissimilar economies?
Growth fundamentals are different: consumption in India, exports in China compared to the natural resources of Brazil and Russia
What is China's political system and how is it changing?
- New authoritarianism: move towards market economy
- Authoritarian gov good for their political order and economic reform
- Democracy will be realised through economic marketisation
- Removal of two- term limit will keep president in power for life
What is an example of growth under an authoritarian government?
Ruanda's president was authoritarian and they saw a huge decline in poverty and rise in GDP that took over USA
What are the advantages and prospects for investment in China?
- Liberalising trade and providing incentives for investors: special economic zones
- Growing middle class and consumption power
- Large labour pool
- Prospect industries: education, green tech/energy, safety, healthcare, travel
- Priority areas: AI, Internet of Things
What are export processing zones/special economic zones?
- Duty free imports of raw and intermediate inputs and capital goods for exportation
- Red tape is streamlined
- Long term tax concessions
- Labour laws/ownership requirements more flexible
- Can be domestic, foreign or JV
What are some examples of big deals in China?
2016 - COSCO tok a 51% stake in Greek Piraeus port for €280.5m
2017 - China National Chemical Corp acquired Swizzled Syngenta AG for $43 bn
How is China changing?
- Shifting from external demand drive economy to domestic demand driven economy
- Economic maturation
- New focus on quality due to middle class
- Consumption catching up with use, 2000-2019 13x-3x less than US
- 51% GDP will come from domestic consumption
What are the implications of China's changing economy?
- Focus on services: evolution from workshop of the world
- Stronger internal competition to sell excess capacity
- Higher living standards = inflation, market for luxury goods
- Import market - easing restrictions
What are the challenges/barriers of a consumer led economy?
- Slower growth
- Restricted industries (media, higher ed)
- High state involvement
- Innovation vs weak IPRs
- Corruption: tigers and flies
- Guanxi and other norms
- Rising wages (64% 2011-16) and production costs
How are anti-China sentiments growing?
- Huawei - US power/security concerns over Chinese control of 5G networks
- US vetoed merger of Ant Financial and MoneyGram (Alibaba owns Ant Financial) due to power concerns
- US-China trade war linked to North Korea nuclear ambitions
How does the US-China trade war affect 1/2 of all products the US imports from China?
- Restriction of imports/exports
- Protectionist policies
- Reduced choice for consumers
- Decline of economic growth but China still attracts US firms
What are the expectations for China in terms of economic slow down?
Value of China's outward mergers and acquisitions via direct investment from 2016-2017 have declined
What are the characteristics of the Indian economy?
- Mixed economy after 1991: accelerating to free market
- Largest democracy
- 1800 political parties, fragmentation adversely affects Econ reform
- Econ growth peaked in 2016 at 8.15%, 7.05%in 2018
What are the advantages and prospects of Indian investment?
- CA in service sectors such as info tech
- Large, educated, English speaking young population
- Strong industries: pharmaceuticals, services (IT, software), automobiles and textiles
- Market potential in rural areas; small-medium sized business
What incentives and facilities are offered to units in SEZs?
- Duty free import/domestic procurement of goods
- 100% tax exemption on export income in first 5 years, 50% for 5yrs after - Exemptions from Central Sales, Service and State Sales Tax
How is India changing?
- Market liberalisation; single brand retailing, aviation industry
- Tax harmonisation: goods and services, removal of internal barriers
- Capital market strengthening: new insolvency and bankruptcy code
- Institutionally weaker and more chaotic version of US and UK
Could India benefit from the US-China trade war?
- Takeover areas where tariffs imposed on China
- Manufacturers may move to India
- lack of infrastructure
- Need labour reform
- Low per capita income
- Poverty and inequality
- Political complexity
Has corruption increased recently?
75% of people say China's corruption has increased
41% say Indian corruption has increased
How are India and China different?
- India has mixed economy with large private sector
- China = command economy
- India - rural-urban divide is marked
What are the characteristics of the emerging markets in South Africa ?
- GDP growth not as high as EM and developing economies
- South Africa - Africa's second largest Econ
- Rich resources in SA: gold, manganese, titanium
What issues should be considered in South Africa?
- Slowing economic growth
- High crime rate
- Weak political accountability
- Xenophobic unrests
- Unequal income distribution
- Black economic empowerment leading to seizure of white lands without compensation
How is murder still on the rise in South Africa?
- 56 people murdered daily
- 17% increase in murder rate over last 6 years
How is Nigeria unique?
- Most populous country in Africa 190 million
- Prevalence of fraud
- Ethinic and religious conflicts
- Terrorism - Boko Haram
- Hostility towards oil firms and expatriates
- Kidnapping a proper profession
- Africa's largest Econ
How is Nigeria similar to South Africa?
High unemployment, corruption, resource rich - oil
What is the dutch disease?
Economic term for the negative consequences associated with the rise in a nation's Econ
- Exploitation of natural resources
- Exploits decline