STUDENT #1:
JOURNALS: THE GLOBAL ECONOMY TODAY
ARTICLE #1:
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Title: Kentucky Fried China
This article is primarily about the expansion of KFC into China. The parent company of KFC is Yum Brands Inc. The Yum’s China division currently has 1,200 locations across every Chinese region except Tibet and is expected to open 275 more in 2005. KFC is dominating rival McDonald’s in china with over $1 billion in revenue last year. Yum’s China division president, Sam Su is even predicting that as the Chinese Economy grows, it will someday surpass the number of KFC restaurants in the United States.
Although the KFC menu in China does consist of original recipe chicken, it has also been tailored specifically to Chinese tastes. One item is a twister sandwich served the way Peking Duck is, but with fried chicken inside along with cucumber shreds. In addition, instead of ordering cole slaw, the Chinese consumers can choose a side of seasonal vegetables. Throughout the different seasons of the year, you can also order bamboo shoots, lotus roots, and even rice porridge.
In addition to KFC, Yum Brands has also opened 39 Pizza Hut restaurants in China this past year, for a total of 146 outlets. The Yum’s President believes that with the rising income and economic growth, Pizza Hut will also be a success. I believe this topic is a global economic issue because of the impact that it will have on the Chinese economy especially with employment and future franchise opportunities.
ARTICLE #2
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Title: T-Mobile to Shed 2,200 Jobs to Cut Costs
This article talks about the job cuts that are going to be made by T-Mobile, the wireless division of Deutsche Telekom AG. The company is looking at an overall cost-cutting program that will save about $1.3 billion every year; however, the 10% cut of the company’s work force is predicted to save approximately $195 million over the next two years. It was said that the cuts will be in Europe and numbers could be close to 2,200 lost jobs. 1,200 cuts will be in Germany alone. An additional 600 jobs are planned to be moved to other companies as some operations are outsourced. Operations other than those in Germany that will be included in the cut consist of those in: Great Britain, the Netherlands, Austria, and the CzechRepublic.
Other cost-cutting actions that will be taking place as part of the program are those such as streamlining relationships with suppliers and vendors, better management of handset subsidies and making more efficient in house use of other parts of Deutsche Telekom. This article is clearly a global economic issue because of the impact that it is going to have on the economies of many nations across the globe as far as employment and also because it is a European company.
ARTICLE #3
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Title: After Ban, Cigarette Sales Plunge in Italy
This article discusses the aftermath of a ban on smoking in public places this month in Italy. The law came into effect on Jan 10th and bans smoking in the public areas of restaurants, bars, offices and factories. There is a fine of up to 2,200 euros or $2,849 for restaurant owners etc., who fail to enforce the ban. The goal of this law is to end passive smoking and deter a habit that statistically has been shown to kill 90,000 Italians a year.
Cigarette sales in Italy have dropped by 23 percent since the government imposed the ban. A more growing concern among the Italian citizens however is the fact that the new law drives away customers from restaurants and puts pressure on these café owners etc. who must enforce this ban. Due to this threat to businesses, the trade association Confcommercio as well as Assotabaccai-Confesercenti have plans to challenge the law in court. This is a global economic issue because of its potential negative affects on the Italian economy through small businesses etc.
ARTICLE #4
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Title: Company Hopes to Take Outsourcing to a New Level: Africa
This article talks about a new company named Rising Data Solutions that has opened the first outsource call center in Ghana, West Africa. This nation, consisting of 20 million people, has a very low cost of living, stable democratic government, and literate, English-speaking population, which makes it perfect outsourcing location. Not only can Rising Data Solutions provide call-center outsourcing for 25-30 percent less than what it would cost in India, but it is also helping to spur economic growth in this West African nation. The jobs pay four to five times the average salary in Ghana. The company employs 15 people now, with plans to hire 100 new call-center agents over the next two quarters. There are hopes that this will help generate sustainable economic development in the country.
This company has had to overcome the negative misconceptions that businesses may have about Africa. With success, they have been able to obtain clients such Haier America, the appliance manufacturer, and an undisclosed wireless telephone company. This issues obviously pertains to global economics because of the fact that it deals with the development of this African nation’s economy.
ARTICLE #5
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Title: Airbus Unveils World’s Biggest Passenger Jet
This article discusses the recent unveiling of the world’s largest commercial jet by Airbus, the European plane maker. As Airbus is in direct competition with the Chicago based Boeing Co., Airbus believes this new development will give them quite a big step ahead of the game. The A380 “superjumbo” will carry 555 passengers which is 33 percent more than the Boeing 747. In addition, on a full tank, it will carry passengers 5 percent farther than Boeing’s long-rang jumbo, resulting in a one-fifth decrease in costs to passengers.
Although some believe that this lead over Boeing could be short-lived, there is a positive outlook ahead for Airbus. Fed-Ex believes that the A380 will increase efficiency of world trade and boost the Fed-Ex network between the U.S., Asia, and Europe. Prime Minister Tony Blair said, “It’s a symbol of economic strength, technological innovation…and shows confidence that we can compete and win in a global market.” Obviously this is global economic because of the potential benefits that this development could bring and even take from the British economy and even other nations as well that are involved in trade etc.
ARTICLE #6
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Title: Entrepreneurs Tap Rich Seam
This article talks about the new economic developments in China that involves the coal industry. The article discusses a new trend that consists of entrepreneurs producing the coal, opposed to the state doing it. A man from Shanxi province named Hu Yulin is an entrepreneur that is head of an organization called the “Shanxi Small and Medium-Size Mines Assn” that is responsible for an entrepreneurial movement that now produces 80 million tons of coal, nearly 20% of the provinces output, from about 400 mines. All the members from the organization are from the city of Wenzhou. This business has been shown to be very profitable as production has nearly doubled.
One problem these entrepreneurs are facing are new laws that are being passed that will shut down for safety reasons, mines that produce less than 90,000 or less tons a year. The government believes that the smaller mines will skimp on the safety precautions and contribute most to the industry’s death toll. This article pertains to global economics because it is a global issue having to do with China and economic because it is affecting the Chinese economy in a big way. Workers in these mines are being able to be paid more because of the profitability of the industry and a lot of investing is taking place.
ARTICLE #7
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Title: Euro Disney to Raise Cash With Low-Priced Stock Offer
This article talks about the current financial well-being of the European theme parks Euro Disney. The theme park announced that they would sell shares at .09 euro each or 11.7 cents in order to raise 253 million euros or $328. The low price offered for the shares sent the price of existing shares down .04euro to .22 euro. Also a part of Euro Disney’s financial restructuring, parent company Walt Disney Company will buy 1.11 billion shares and Prince Walid bin Talal of Saudi Arabia will buy 217.3 million shares.
Euro Disney hopes to use this financing to get the liquidity and capital that they need for new attractions. They believe that there is plenty of room for growth in this industry with the right restructuring, etc. This issue will affect Europe and Paris economically in many ways. Not only do the parks provide employment for many people, they draw in tourists to the area, which in turn helps their economic standing in the area.
ARTICLE #8
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Title: Venezuela Tensions Worry Oil Executives
This article talks about Venezuela’s actions towards finding new options towards getting more income and finding new markets for its oil. The Venezuelan national oil company had exploration suspended for Harvest Natural Resources of Houston and also suspended a plan to develop a new oil field in Venezuela from Conoco Phillips. It was stated by the Venezuelan energy minister that the government would be reviewing 33 operating agreements with oil companies dating back to the 1990’s, to see if they were still good options for Venezuela. Venezuela is attempting to gain more control of their resources and find better deals in a wider range of buyers.
The U.S receives more than half of Venezuela’s total production. The concern is that some of this production will be diverted to other markets, such as China. Venezuela claims that it will keep the U.S as their main market, and only send new production to China. The two companies listed above that have been affected by this potential restructuring are a bit concerned about the renegotiation of the current agreements, however, only time will tell of what to expect. This article is a global economic issue because it has the potential to affect the economies of many nations through their oil markets.
ARTICLE #9
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Title: China Aviation Oil Singapore Asks Creditors for Debt Relief
This article discusses the debt situation of China Aviation Oil Singapore. The company practically has a monopoly on jet fuel imports into China. The company apparently owes creditors a sum of $550 million and has recently asked that 59 percent of the debt as part of a bailout of the company. The requests consisted of offering creditors 41.5 cents for every dollar of debt. The company also offered to pay $100 million up front and $120 million over eight years. The parent company, China Aviation Oil is helping by converting $118 million loan into equity and investing another $100 million.
China Aviation Oil Singapore got into this large amount of debt from losses in betting on oil prices. The High Court in Singapore has not yet come to a decision, but is requesting a reorganizing plan from the company. Creditors will most likely request for a better proposal, in order to get the most of the debt owed that they can. The goal of the Chinese government would be to have a ruling that would balance out the market. This article is a global economic issue because it has an effect on the Singapore economy through this oil market, especially because this company has a monopoly in this area.
STUDENT #2:
ENTRY ONE: BBC World Service
G7 Supports Tsunami Debt Freeze
This article was reporting the decision of the G7 group to freeze debt payments from those countries affected by the recent and devastating tsunami on 26 December 2004. Fundamentally, this was disaster of biblical proportions, which has impacted hundreds of thousands of people in the region, and indeed, world-wide. On an economic and developmental level, the effects of this natural disaster are seemingly unquantifiable. For a region already suffering from crippling external debt, the reconstruction of decimated infrastructures, homes, and industries would be impossible without the compassion and continued contribution of the entire Global Community.
This particular measure, a freeze by the G7 on repayments for any afflicted country that requests it, is said to last for one year’s time. A British official is quoted in the article as having estimated a $5 billion, or £2.6 billion, savings by debtor countries over that period. UK Chancellor Gordon Brown was quoted as saying that he believes the G7 and Paris Club of creditor countries should be open to any and all “options for further assistance”. There was even some suggestion by the UK that certain debtors, such as Sri Lanka, should have their debt cancelled altogether. No such measure was officially announced in this article. The article does mention that foreign governments have offered an excess of $4 billion in aid, $1 billion of which was pledged by private individuals, companies, and NGOs.
In addition to the G7 group’s debt freeze, the article also notes that Switzerland and Kuwait have offered to reschedule the debt owed to them by the affected countries. The Asian Development Bank (ADB) is apparently also offering grants and heavily discounted loans to countries in the region. The article included a graph (source: World Development Movement) showing the debt of each affected country as a percentage of its GDP. Indonesia owes 80%, India 21%, Thailand 48 %, Sri Lanka 59%, and Maldives 45%. The BBC World Service reports that between the affected countries, $272 billion, or £144 billion, in external debt has been accrued. The extent of the recovery and reconstruction costs for the region are yet untold, however at a glance one can easily see it will require much more than the nations in this region can manage on their own. This was a global disaster, requiring a global response. The world has indeed responded on the economic front, as well as the humanitarian front, to help meet the many needs of South Asians, as they pick up the pieces and attempt to rebuild their lives.
ENTRY TWO: BBC World Service
Chinese Exports Rise 25% in 2004
As noted in the title of the article, this writing covers the explosion in Chinese exports during 2004. China is undergoing a period of what BBC World Service calls “breakneck growth”. The article states that China has topped 9% growth for the second year in a row, and that China’s trade surplus for 2004 marks a six-year high. In addition, BBC reports that China also produced a 25.7% increase in its tax revenues this past year, despite sizable tax rebates to many exporters. According to the Ministry of Commerce, China’s exports in December 2004 alone brought the annual total up 35.4%. However, the BBC reports that since China’s imports increased a similar amount in December, the Chinese trade deficit actually rose to $43.4 billion.
The second topic covered in this article dealt with economic tensions between China and the United States. BBC calls the soaring Chinese trade deficit a “particularly sensitive issue in the US”. It also reports that “the peg keeping the Chinese Yuan at around 8.30 to the US Dollar is often blamed for job losses in the United States”. The article quotes an American Congressional report which stated that 1.5 million jobs had vanished between 1989 and 2003. Clearly, from a US perspective, a connection is being drawn between the two phenomena. In addition, the United States has a sizable trade deficit with China. BBC reports that in 2003 the US deficit with China was $124 billion, and was projected to have risen to nearly $150 billion in 2004.
The fact of the matter is that this trend of Chinese economic growth through global trade is probably going to continue at an even greater rate as they continue to develop and industrialize. China’s industrialization has other potential global effects as well. As per capita income rises, so too will ownership and operation of automobiles, and consumption of oil. Given China’s overwhelming population of 1.3 billion people, this will undoubtedly be a matter of economic, environmental, and political consequence, the world over, in the decades to come. Furthermore, as its hi-tech and manufacturing industries continue to develop, China will increasingly become a dominant player in the arenas of global trade and finance.
ENTRY THREE: Christian Science Monitor
Turks Adjust to New Currency
This article, published by the Christian Science Monitor (CSM), focuses on Turkey, and its recent switch to a new, slimmed-down version of the lira, called the New Turkish Lira, or YTL. CSM reports that the new currency “chops the last six zeros off the old lira”. According to the article, the recent trimming of the lira “only became a reality in the past two years, when the country’s chronic runaway inflation was finally tamed”. The CSM correspondent quotes a London based Merrill Lynch analyst as saying, that in part, government instituted economic reforms in the banking sector were responsible for this remarkable turn-around.