Most of the production for Apple's products are done outside the United States. Is that a good or bad outcome for Americans? Focusing on the labor, it seems as though United States lose these jobs that are outsources overseas. Around 700,000 people work for Apple's contractors, most notably Foxconn. The factory in Shenzhen alone employs 430,000 workers. It's been cited that the necessary skills are more easily found in Asia than the United States. Apple's analysts estimated that it would take nine months to find the necessary number of engineers to oversee and guide the assembly lines; in China, it took 15 days.
But it's not an entirely a loss for United States. Apple is able to charge its products relatively cheaply and retain enormous amount of profit as a result of utilizing the labor in China. As a comparison, Apple retained a whopping 23.95% profit margin in 2011, while Hewlett-Packard (NYSE:HPQ) only had 5.56% and Dell (NASDAQ:DELL) 4.28%. This wealth has benefited individual investors and pension plans. Furthermore, the price of the Apple products would be higher if they were made in United States. Estimates put additional $65 into each iPhone made with US labor. While Apple can still maintain a profit with that increase, it is unsure how much of that hike in input prices will be pushed onto the consumers. However, the bigger issue is still the availability of skillful labor.
Sources:
Showing posts with label China. Show all posts
Showing posts with label China. Show all posts
Sunday, January 22, 2012
Wednesday, October 19, 2011
Global Airline Industry: Growth or Decline?
Recently, it was announced that economic growth in China has been slowing down as the government has taken measures to control inflation. During the third quarter, the economy grew at 9.1%, down from previous quarter's 9.5%. This has caused concern as China is the main exporter of goods to the West and area of development for many Western companies. This is particularly true for the airline industry, as rising development has led to more demand of aircraft in the region. This week, it was revealed that China Eastern airline has canceled its order of 24 Boeing 787 Dreamliner planes, citing the withdraw "due to Boeing Company's delay in delivery," rather than any economic slowdown indications. What is the forecast of airline industries given these two recent events?
After the announcement by China Eastern, Boeing remained optimistic. A Reuters article quoted Marketing VP Randy Tinseth in his statement that "as we look forward, we expect to see the Dreamliner order base increase, we expect to see more orders, we expect to see more cancellations, especially as we go through mitigation with our customers." While the development may put more pressure on Boeing to hasten its production rate to its target of 10 units per month by 2013, the outlooks seem promising in other markets. Australia's Qantas Airways, Korean Air Lines, and other Chinese airlines such as China Southern, have all remained committed to introduce the Boeing Dreamliner.
Long-term forecasts may be even more promising. According to Tinseth, "air travel in Northeast Asia is expected to grow moderately at 4.3 percent annually over the next 20 years." Indeed across the emerging markets, the demand for aircraft will remain strong for the next decades to come. Even with China's slowdown, the growth is still hovering at around 9%, compared to that of United States of Europe, which hovers between 1 to 2%. According to Parker Hannifin Chairman and Chief Executive Donald Washkewicz, China's downward trend has "been a short-lived thing and activity picks up again." The optimism is voiced through Boeing, which forecasts 33,500 new aircraft by 2030.
Despite given the recent reports of China's slowdown with its economy and the cancellation of 24 Boeing Dreamliner units by China Eastern, it looks as though that the global airline industry will see growth in the immediate future.
Sources:
After the announcement by China Eastern, Boeing remained optimistic. A Reuters article quoted Marketing VP Randy Tinseth in his statement that "as we look forward, we expect to see the Dreamliner order base increase, we expect to see more orders, we expect to see more cancellations, especially as we go through mitigation with our customers." While the development may put more pressure on Boeing to hasten its production rate to its target of 10 units per month by 2013, the outlooks seem promising in other markets. Australia's Qantas Airways, Korean Air Lines, and other Chinese airlines such as China Southern, have all remained committed to introduce the Boeing Dreamliner.
Long-term forecasts may be even more promising. According to Tinseth, "air travel in Northeast Asia is expected to grow moderately at 4.3 percent annually over the next 20 years." Indeed across the emerging markets, the demand for aircraft will remain strong for the next decades to come. Even with China's slowdown, the growth is still hovering at around 9%, compared to that of United States of Europe, which hovers between 1 to 2%. According to Parker Hannifin Chairman and Chief Executive Donald Washkewicz, China's downward trend has "been a short-lived thing and activity picks up again." The optimism is voiced through Boeing, which forecasts 33,500 new aircraft by 2030.
Despite given the recent reports of China's slowdown with its economy and the cancellation of 24 Boeing Dreamliner units by China Eastern, it looks as though that the global airline industry will see growth in the immediate future.
Sources:
- http://finance.yahoo.com/news/China-Eastern-cancels-order-apf-3003985708.html?x=0&sec=topStories&pos=8&asset=&ccode=
- http://www.reuters.com/article/2011/10/18/uk-boeing-sees-more-dreamliner-cancellat-idUSLNE79H01X20111018
- http://www.militaryaerospace.com/index/display/article-display/3775674597/articles/avionics-intelligence/news/2011/10/boeing-predicts__200.html
- http://www.marketwatch.com/story/emerging-markets-boost-us-aerospace-2011-10-19?siteid=yhoof
- http://www.bbc.co.uk/news/business-15331523
Thursday, October 13, 2011
Is China Getting Richer?
People these days often hear about China's economic growth and its enormous impact on the global economy. Yes, China contributed 19% of the world's economic growth in 2010, and that figure is expected to increase to 24% this year. Western companies have invested in China to stay competitive in one of the world's fastest-growing market. This Tuesday, Boeing announced that it officially opened a service center in Beijing. China's travel is expected to grow annually at 7.6% over the next 20 years, and Boeing, which already has 800 of its airplane units in Chinese airlines, hopes to maintain the company's majority share of the market of commercial airlines in China.
But is this really indicative of China getting richer? A recent New York Times article argues that while its economy experiences rapid growth, China sees its households struggling to keep up, as those making more than the average usually save most of their earnings. While the US saves roughly 5% of the disposable income, that figure approaches 40% in China. Various factors, from depressed wages and soaring home prices, impel the Chinese to save. However, the interest rate on saving accounts are artificially low, not able to keep up with the rising inflation rate. As a result, consumption levels are low. Those who benefit from the savings are state institutions, fueling the rise of real-estate developers and government spending on railroad. As for the commoners, they have little choices. Many wish to avoid investing in the volatile stock market, and laws restrict the ability to invest overseas.
The most convenient outlet for many Chinese then, became the real estate market. Compared to the same period a year ago, Chinese investment in real estate was up 32.9% during the first half the year. Real estate prices have overall tripled in the past five years. Many have been concerned about the effects of a housing bubble burst. This is a legitimate concern for the United States, as China's growth is crucial for the multinational companies investing there; United States sold $92 billion in goods and services to China last year. But the focus still hasn't been on domestic consumption. So far, much attention has been focused on cheap land and capital for heavy investing. The soundness of the Chinese economy will need to depend on how the households can spend, not just the state corporations.
So is China getting richer? It depends on from what perspective one looks at. Is the GDP growing? Yes. Are foreign investments increasing? Yes. But are the average household better off? As ambiguous as the question may sound, the answer may just be "not exactly."
Sources:
But is this really indicative of China getting richer? A recent New York Times article argues that while its economy experiences rapid growth, China sees its households struggling to keep up, as those making more than the average usually save most of their earnings. While the US saves roughly 5% of the disposable income, that figure approaches 40% in China. Various factors, from depressed wages and soaring home prices, impel the Chinese to save. However, the interest rate on saving accounts are artificially low, not able to keep up with the rising inflation rate. As a result, consumption levels are low. Those who benefit from the savings are state institutions, fueling the rise of real-estate developers and government spending on railroad. As for the commoners, they have little choices. Many wish to avoid investing in the volatile stock market, and laws restrict the ability to invest overseas.
The most convenient outlet for many Chinese then, became the real estate market. Compared to the same period a year ago, Chinese investment in real estate was up 32.9% during the first half the year. Real estate prices have overall tripled in the past five years. Many have been concerned about the effects of a housing bubble burst. This is a legitimate concern for the United States, as China's growth is crucial for the multinational companies investing there; United States sold $92 billion in goods and services to China last year. But the focus still hasn't been on domestic consumption. So far, much attention has been focused on cheap land and capital for heavy investing. The soundness of the Chinese economy will need to depend on how the households can spend, not just the state corporations.
So is China getting richer? It depends on from what perspective one looks at. Is the GDP growing? Yes. Are foreign investments increasing? Yes. But are the average household better off? As ambiguous as the question may sound, the answer may just be "not exactly."
Sources:
Sunday, September 25, 2011
Congestion Charge Plan in Beijing
Earlier this month, officials in the Chinese capital said that congestion fees will be introduced on some roads to combat the notorious traffic woes in the city. The idea isn't novel; some European cities already have the practice, and New York City has also considered the plan. Beijing currently has 4.8 million registered vehicles. Measures have taken to curb that growth. Since 2008, certain vehicles have been barred from the streets depending on its license plate and the day of the week. Furthermore starting January, cap has been placed on new car registrations at 20,000 per month.
The goal of the congestion fee is to encourage public transportation usage. A senior municipal official is quoted to say that "by 2015, our goal is to have public transportation handling 50 percent share of traffic volume inside the Fifth Ring Road." However, strong measures have been taken in the past to encourage public transportation usage. The Beijing Subway has enormously expanded within the last decade to climb to worldly ranks of 4th in track length and 5th in ridership. Furthermore in 2007, the fares were reduced to a flat-rate of 2 RMB with unlimited transfers. The municipal government took on the deficit to encourage public transportation usage. While ridership has increased, so has the ownership of cars with the rise of middle-class who can afford personal vehicles.
Transportation service is an inelastic demand. An environmental activist in Beijing is quoted to say that "imposing the toll itself won't change that people have to travel long distances from their homes to work." The convenience offered by cars still exceeds that from mass transit. To truly encourage public transportation usage, mass transit simply needs to be more convenient, by exploiting the pitfall of vehicle usage, congestion. If mass transit can be much faster and more reliable, it could potentially be more convenient. A key to make faster trains is to build express lines. Currently, neither the Shanghai and Beijing Metro has express lines running parallel to local lines, as they do in some parts of New York City's Subway. Instead of focusing on express, both of the Chinese cities are currently expanding lines to new areas. While that encourages more mass transit usage from outer, suburban areas, it still leaves traveling within the city center somewhat inconvenient. By investing in express lines that could take a person from Point A to Point B faster than a car could in the normally congested streets, citizens may truly see public transportation as more convenient.
For the growing middle class, money may not be the ultimate incentive. Despite higher parking prices and other costs associated with driving, they still buy vehicles in bulks and become angered when they can't get the vehicle registration under the current quota. Lowering the costs of public transportation fares may be a miniscule amount to them. Instead, making them more convenient may be the best way to tap into their incentives and get into the heart of the congestion problem in Beijing, and other crowded metropolises.
Sources:
The goal of the congestion fee is to encourage public transportation usage. A senior municipal official is quoted to say that "by 2015, our goal is to have public transportation handling 50 percent share of traffic volume inside the Fifth Ring Road." However, strong measures have been taken in the past to encourage public transportation usage. The Beijing Subway has enormously expanded within the last decade to climb to worldly ranks of 4th in track length and 5th in ridership. Furthermore in 2007, the fares were reduced to a flat-rate of 2 RMB with unlimited transfers. The municipal government took on the deficit to encourage public transportation usage. While ridership has increased, so has the ownership of cars with the rise of middle-class who can afford personal vehicles.
Transportation service is an inelastic demand. An environmental activist in Beijing is quoted to say that "imposing the toll itself won't change that people have to travel long distances from their homes to work." The convenience offered by cars still exceeds that from mass transit. To truly encourage public transportation usage, mass transit simply needs to be more convenient, by exploiting the pitfall of vehicle usage, congestion. If mass transit can be much faster and more reliable, it could potentially be more convenient. A key to make faster trains is to build express lines. Currently, neither the Shanghai and Beijing Metro has express lines running parallel to local lines, as they do in some parts of New York City's Subway. Instead of focusing on express, both of the Chinese cities are currently expanding lines to new areas. While that encourages more mass transit usage from outer, suburban areas, it still leaves traveling within the city center somewhat inconvenient. By investing in express lines that could take a person from Point A to Point B faster than a car could in the normally congested streets, citizens may truly see public transportation as more convenient.
For the growing middle class, money may not be the ultimate incentive. Despite higher parking prices and other costs associated with driving, they still buy vehicles in bulks and become angered when they can't get the vehicle registration under the current quota. Lowering the costs of public transportation fares may be a miniscule amount to them. Instead, making them more convenient may be the best way to tap into their incentives and get into the heart of the congestion problem in Beijing, and other crowded metropolises.
Sources:
Thursday, September 1, 2011
Maglev Ride
There was absolutely no need for me to ride the Shanghai Maglev yesterday as I headed to Pudong International Airport. There was enough time to simply take Line 2 all the way. But more as adventure, I got off the Metro at Longyang Road Station and paid 40 RMB for an one-way Maglev ticket. The 30 km journey was completed in less than 8 minutes.
Magnetic levitation operates differently from conventional rail technology in that it doesn't use wheels, bearings or axles. Instead, the magnetic field induced on either side of the vehicle helps to levitate and propel the train. As a result, there is no rolling friction, minimal maintenance costs, and little weather-related disruptions.
While the technology may be state-of-the-art, Shanghai Maglev faces other challenges since its inauguration in 2004. The most common criticism it has received is its short length, specifically that the line terminates in Longyang Road, which is around 8 km and 5 Metro stops away from Lujiazui financial district, and even further from notable sites in the city center, such as People's Square. The need to transfer for further 20-30 min journey adds to the inconvenience. Furthermore, riding the Maglev is relatively expensive. Single-ride economy seat starts at 40 RMB with proof of airline ticket purchase, while a typical moderate-length Metro ride costs 4 or 5 RMB.
There has been long-term plans to extend the Maglev into the city center, and continuing westward to Hongqiao Airport. Shanghai is growing at tremendous pace. Its Metro only began operating in 1995, but the ridership has already surpassed that of New York City Subway to claim world's 4th spot. As constructions for future lines and extensions occur by the minute, one can only hope that Maglev will be made more accessible soon. That the technology is remarkable is undisputed; only the operations stand in Maglev's way for it to transform transportation within and beyond China's largest city.
Maximum speed in the early afternoon hours was 300 km/hr.
Magnetic levitation operates differently from conventional rail technology in that it doesn't use wheels, bearings or axles. Instead, the magnetic field induced on either side of the vehicle helps to levitate and propel the train. As a result, there is no rolling friction, minimal maintenance costs, and little weather-related disruptions.
While the technology may be state-of-the-art, Shanghai Maglev faces other challenges since its inauguration in 2004. The most common criticism it has received is its short length, specifically that the line terminates in Longyang Road, which is around 8 km and 5 Metro stops away from Lujiazui financial district, and even further from notable sites in the city center, such as People's Square. The need to transfer for further 20-30 min journey adds to the inconvenience. Furthermore, riding the Maglev is relatively expensive. Single-ride economy seat starts at 40 RMB with proof of airline ticket purchase, while a typical moderate-length Metro ride costs 4 or 5 RMB.
There has been long-term plans to extend the Maglev into the city center, and continuing westward to Hongqiao Airport. Shanghai is growing at tremendous pace. Its Metro only began operating in 1995, but the ridership has already surpassed that of New York City Subway to claim world's 4th spot. As constructions for future lines and extensions occur by the minute, one can only hope that Maglev will be made more accessible soon. That the technology is remarkable is undisputed; only the operations stand in Maglev's way for it to transform transportation within and beyond China's largest city.
Saturday, July 2, 2011
Effects of Beijing-Shanghai High-Speed Railway
When it comes to high-speed railway construction, United States and China are on totally different playing fields. In the United States this year, three governors have rejected funds for the construction in their states, citing high costs and potential low ridership. Meanwhile in China, the rail network is expanding enormously. This past week, the Beijing-Shanghai High-Speed Railway was debuted, connecting the country's political and commercial hub in less than 5 hours. But the effects of the railway aren't limited to Beijing and Shanghai.
Jinan is located about 400 km south of Beijing. The capital of Shandong province, it serves as a major stop along the Beijing-Shanghai route. The railway will help to bring 100,000 passengers to Jinan. The flux of people to the region will help to revitalize tourism and investment in the area. The city has already responded by planning to invest around 350 billion yuan over the next 10 years to build an urban complex around the railway station. As demand for land around the urban center rises, so will the property price. Real estate project currently under construction one and a half kilometers away from the station has increased to 6,400 yuan per square meter, up from 4,000 yuan in 2009. The railway will enormously support the growth of cities along the railway route like Jinan. From the government's standpoint, the investment will greatly benefit the economy of Eastern China.
One industry sector that will be hurt by the railway service is the airline industry. One-way train ticket prices cost anywhere from 410-1,750 yuan, while flight costs around 1,300 yuan. In order to remain competitive, airline industries have practices predatory pricing, tremendously lowering the tickets in order to entice passengers. But airlines will need to do more than offer enticing deals to retain their customer base. Flight delays and cancellations have been consistent concerns for passengers. With competitions looming, the railway will "put pressure on the airlines to keep more on their schedule." From the citizens' standpoint, the addition of competition benefits the market as a whole, by giving industries more incentives to provide consumers with better services.
With the 90th anniversary of the formation of the Communist Party in China, many assume the railway debut as a political strategy. But if all runs smoothly, the biggest beneficiaries will be the people, visitors, and businesses of China. Investment can be a great sunk cost initially; the government spent $33 billion (US) on the track. But the benefits can spillover just as greatly given time.
Sources:
Jinan is located about 400 km south of Beijing. The capital of Shandong province, it serves as a major stop along the Beijing-Shanghai route. The railway will help to bring 100,000 passengers to Jinan. The flux of people to the region will help to revitalize tourism and investment in the area. The city has already responded by planning to invest around 350 billion yuan over the next 10 years to build an urban complex around the railway station. As demand for land around the urban center rises, so will the property price. Real estate project currently under construction one and a half kilometers away from the station has increased to 6,400 yuan per square meter, up from 4,000 yuan in 2009. The railway will enormously support the growth of cities along the railway route like Jinan. From the government's standpoint, the investment will greatly benefit the economy of Eastern China.
One industry sector that will be hurt by the railway service is the airline industry. One-way train ticket prices cost anywhere from 410-1,750 yuan, while flight costs around 1,300 yuan. In order to remain competitive, airline industries have practices predatory pricing, tremendously lowering the tickets in order to entice passengers. But airlines will need to do more than offer enticing deals to retain their customer base. Flight delays and cancellations have been consistent concerns for passengers. With competitions looming, the railway will "put pressure on the airlines to keep more on their schedule." From the citizens' standpoint, the addition of competition benefits the market as a whole, by giving industries more incentives to provide consumers with better services.
With the 90th anniversary of the formation of the Communist Party in China, many assume the railway debut as a political strategy. But if all runs smoothly, the biggest beneficiaries will be the people, visitors, and businesses of China. Investment can be a great sunk cost initially; the government spent $33 billion (US) on the track. But the benefits can spillover just as greatly given time.
Sources:
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