Further to our comments last week, it was particularly interesting to be in Beijing, China last week while the “change” in government was on.
The current population of China is currently in the region of 1,340,000,000, (that’s 1.34 Billion) in comparison to Australia currently standing at around 22,800,000 (22.8 Million). While we like to complain about our government from time to time, consider this. The communist party has around 80,000,000 members, (around 3.5 times more than the population of Australia) and the party is led by just 7 men! The term of the government is 10 years, and they don’t actually have elections. The current government decides on who will follow them in.
While watching CNN on the television during our stay, a story on the fact that the 7 men were having some differences over the past month was beginning to air, the TV simply went blank, it was not a technical issue. Also while we were there one day Google was suspended, there is also no YouTube, Facebook or any other social media sites – I can’t disagree with the last one!
In the local Chinese media, the talk is always positive about growth and that employment rates are on the increase, however in talking too many of the delegates at the conference and business owners that we met, this is contrary to what they are seeing on the ground. In one instance a business owner that employs over 500 people discussed at length problems that he was having with the cost of labour, employee strikes, storm water runoff, employee car parking etc. His employee base has actually halved in the past 2 years as they now prefer to automate processing to get away from having to use “expensive” labour.
There is no doubt that China is an absolute superpower and the people were more welcoming than you could imagine, but don’t believe everything you hear about the strength of their economy as the manufacturing and recycling industries that effect our business, are going through some ever changing times.
In reading many articles I have read this morning, I have seen the phrase “Fiscal Cliff” which I wanted to know more about. Please find the following clear explanation that I have found;
**** The Fiscal Cliff Explained ****
“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.
Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron’s, over 1,000 government programs – including the defense budget and Medicare are in line for “deep, automatic cuts.”
**** DJ BASE METALS: LME Metals End Higher on Brighter US Picture **** By Francesca Freeman
Base metals closed higher on the London Metal Exchange Monday, boosted by optimism that U.S. lawmakers may be closer to addressing the looming “fiscal cliff” as well the release of some encouraging economic data.
Base metals started the session on a strong footing after U.S. House Speaker John Boehner on Friday described talks on tackling the fiscal cliff–a combination of tax increases and spending cuts that will start in January if Congress doesn’t reach a budget deal–as “very constructive.”
The fiscal cliff is a big risk event for growth-related assets, such as base metals, and the news was therefore taken positively by investors.