Latest news with #BenSimpfendorfer
The Star
3 days ago
- Business
- The Star
‘Hefty price tag' for subsidy scheme: is China's consumer boost sustainable?
For months, consumers across China buying everything from iPhones to cars and washing machines have enjoyed steep discounts – courtesy of the government. This vast subsidy programme has played a key role in boosting China's consumer spending this year, helping the economy remain relatively robust even amid an unprecedented trade war with the United States. But in June, some of those offers suddenly disappeared. In the eastern Jiangsu province, local authorities stopped issuing vouchers for online purchases of home appliances. Around the same time, several other provinces suspended their trade-in programmes for cars and appliances, citing depleted funds. The cancellations were the first sign that a reckoning may be approaching over China's consumption-boosting policies, which have succeeded in their main goals – but come with a hefty price tag. Last week, Beijing reaffirmed its support for the national trade-in scheme for durable goods, pledging that the rest of the 300 billion yuan (US$41.8 billion) funding would be allocated to local governments before the end of the year, with the next two rounds of funding set to be issued in July and October. On Thursday, Li Chao, deputy director of the National Development and Reform Commission's Policy Research Office, said the government would formulate monthly and weekly plans to monitor the utilisation of those funds. 'This will ensure the orderly implementation of the consumer goods trade-in policy throughout the year,' she added. Yet, economists are increasingly questioning the sustainability of the policies. Though the sums involved are not a big burden for China's central government, some argue the cost of the programme may be putting more pressure on the finances of local authorities, which are already struggling under high debt levels. Beyond that, there is also concern about the policies' diminishing return on investment. Some worry the trade-in programme may simply be pulling forward future demand, meaning the current spending binge may be followed by an inevitable hangover once the policies come to an end. All of that has led to a growing debate over how long Beijing should continue funding the programme, especially if the US tariff war grinds on past this summer. There's the risk that sentiment simply weakens again when the rebates run out 'The trade-in scheme is a good short-term option, but it assumes that demand recovers and consumer confidence strengthens,' said Ben Simpfendorfer, a Hong Kong-based partner at the management consulting firm Oliver Wyman. 'These trade-in schemes work best when they're accompanied by structural reform that focuses on the medium term. Otherwise, there's the risk that sentiment simply weakens again when the rebates run out,' he added. The headlines figures suggest the trade-in programme has made a real impact this year. During the first five months of 2025, China's retail sales grew 5.0 per cent year on year, up from 3.8 per cent in the last quarter of 2024, despite a turbulent global economy. But economists from Nomura forecast that retail sales growth would fall to just 3.1 per cent year on year in the second half of 2025, due to the inevitable 'payback' from the trade-in programme, a higher base from last year, and the new austerity rules for government officials that are expected to deal a blow to the catering sector. 'In addition to providing a one-off subsidy to consumption, Beijing might need to consider longer-term structural policies to support consumption,' they said in a report published this week. Reforms to the social security system – such as raising basic pension payments to low-income households and increasing subsidies for basic medical insurance – would be the most effective long-term policy moves to bolster consumption and reduce inequality, according to the report. Some economists also worry about the financial strain the consumer goods trade-in schemes could place on local governments, which are required to cover a percentage of the total subsidies: 5 per cent for China's western provinces, 10 per cent for the central provinces, and 15 per cent for the eastern provinces. Given the ongoing US-China trade negotiations, the policy should be expanded rather than halted Many local governments in China are already grappling with high debt levels and facing budgetary pressures due to a decline in income from land sales amid a downturn in the property sector. 'The overall pressure on local governments [from funding the trade-in schemes] is not too big, but for those poorest regions, they may genuinely lack the funds to cover this expense,' said Lu Ting, chief China economist at Nomura. However, Xue Qinghe, CEO of the private Guangdong-based think tank Zhibenshe, said the trade-in programme was unlikely to impose significant pressure on local governments, as it could also boost local tax revenues. 'From the current perspective of how the trade-in programme is supporting consumption, this policy remains positive. Coupled with the ongoing US-China trade negotiations, the policy should be expanded rather than halted,' Xue said. On Tuesday, Apple's official website in China showed that some of its products now benefitted from national subsidies worth up to 2,000 yuan, with the deals applying to purchases at the company's stores in Shanghai as well as online purchases with a Beijing shipping address. - SOUTH CHINA MORNING POST
South China Morning Post
7 days ago
- Business
- South China Morning Post
China's firms must integrate to succeed abroad, executives say at ‘Summer Davos'
Chinese companies should relocate their entire manufacturing ecosystems – rather than just completing the assembly of goods in another country – to solidify their overseas expansions, industry insiders said during the Annual Meeting of the New Champions in Tianjin. With uncertainty over global trade on the rise in the second term of US President Donald Trump, Chinese companies will look to strengthen the resilience of their supply chain by building factories in new markets, either for export or local sale, said Ben Simpfendorfer, partner and chief Asia-Pacific macro strategist at consulting firm Oliver Wyman. 'We're moving to a world where tariffs are generally higher. Trade tensions will worsen – not just between China and the US, but potentially between other countries as well,' said Simpfendorfer on Tuesday during the World Economic Forum event, also known as 'Summer Davos'. 'In order to avoid tariffs entirely … we actually might see a larger part of the Chinese ecosystem move abroad.' China's manufacturers began relocating their supply chains overseas during Trump's first term. To mitigate the fallout from his tariff increases, they started building plants in Southeast Asia and gradually expanded their footprints to countries like Mexico and Morocco. But Washington does not want these countries to become reliable bypass routes for Chinese products. Under Trump's initial 'Liberation Day' tariff package , unveiled on April 2, some countries in the Association of Southeast Asian Nations (Asean) would have been subject to higher duties than China. They avoided this fate after the US paused those higher rates for 90 days to placate global markets, instead applying a 'baseline' 10 per cent increase to nearly all its trading partners.
CNBC
25-06-2025
- Business
- CNBC
CNBC's The China Connection newsletter: Whispers of a new world order in Tianjin
The U.S. entering the Israel-Iran conflict over the weekend has dominated media headlines, but the rustlings this week at the "Summer Davos" conference in Tianjin, China, were more about navigating a future less intertwined with Washington. A decade ago, goods, capital, tech and talent flowed between the so-called East and West; now it's about flows between Global South countries, said Ben Simpfendorfer, Hong Kong-based partner at management consultancy Oliver Wyman. "The mood [in Tianjin] reflects a changed world order. The Global South is more connected than ever." Global South loosely refers to less developed economies, especially countries outside the U.S. and European orbits. Think Southeast Asia, Africa, Latin America and the Middle East — all regions China has sought to develop trade and political relations with. "There are 130 neutral countries that are willing to do business across geopolitical fractures and are looking for business, and many of them are run by leaders who are relatively internationalist ... I do look forward to opportunities in the Global South," said Aparna Bharadwaj, managing director at Global Advantage Practice at a WEF panel. China, which has been deepening its relationship with the Global South, had its Premier Li Qiang urging more trade for "reshaping" the world order at the WEF forum on Wednesday. "We could be moving to a world where Asia and the Middle East emerge as a new and compelling economic bloc that are still integrated to a degree with Europe and the United States but that integration fluctuates," Simpfendorfer said. Since 2007, the Swiss-based World Economic Forum has run a summer version of its Davos gathering in China, alternating between the cities of Tianjin and Dalian, both in the northern part of the country. But as local Chinese governments have ramped up their own conferences and the overall economy has slowed, foreign businesses interested in China have not had to rely as much on Summer Davos matchmaking. Disruptions from the pandemic and U.S-China tensions have also taken their toll. This year though, even otherwise quiet groups of attendees turned into slightly aggressive crowds to snag spots for select events including talks on artificial intelligence and the economic outlook. Seats filled up fast for the release of WEF's annual "Top 10 Emerging Technologies" report — now in its third year of collaboration with the Dubai Future Foundation. Previously, the report had been created by the forum with Scientific American. Some prominent leaders took the opportunity to visit China. Singapore's Prime Minister Lawrence Wong, Vietnam's Prime Minister Pham Minh Chinh and Ecuadorian President Daniel Noboa Azín were among the top political leaders attending this year. "The U.S. tariff shock has been a wake-up call for the Global South in general about the need to diversify," Simpfendorfer said, citing recent conversations with businesses in Malaysia and Vietnam. But he pointed out that it won't be easy to shift from targeting one U.S. market to multiple Global South markets. To attract trade partners, countries from Egypt to Vietnam to China are all trying to enhance their economic competitiveness. "It's a wake-up call for Chinese multinationals to build out genuinely international businesses," Simpfendorfer said, adding that the learnings from the past two decades would no longer be a good guide for the next 20 years, given the transformational impact of artificial intelligence. Egyptian Minister of Investment and Trade Hassan El Khatib told CNBC's Chery Kang on the sidelines of the forum on Tuesday that the country aspires to be in the top 20 in business competitiveness by 2030, following a major reform program launched last year to spur private sector development. He emphasized Egypt's labor pool and engineering talent, and noted how the country was courting investors from around the world. As U.S.-China tensions remain far from resolved, more countries may be keen to take the Chinese premier up on his invitation to reshape the Chui, Head of Global Issuer Services at Hong Kong Exchanges and Clearing, talks about recent renewed interest in Hong Kong as a market, as it attracts a wave of foreign investors and IPOs. Eswar Prasad, professor at Cornell University and former head of IMF's China division, talks about why both U.S. and China are feeling the pressure to "lower the temperature" on their trade relationship. Joe Ngai, Chairman of McKinsey China, believes that corporates in China have shown resilience despite external threats including tariff uncertainties and geopolitical tensions in the Middle East. China's fiscal revenue growth stalls in May. The central government's fiscal revenue grew just 0.1% in May from a year earlier, slowing from a 1.9% expansion in April. Non-tax revenue declined 2.2%, its first annual drop since 2014, while tax revenue saw a modest gain of 0.6% from a year earlier. Chinese Premier Li Qiang urged not to turn trade into a political matter. He was speaking at the opening plenary of the World Economic Forum's annual conference in China, often dubbed "Summer Davos." The Chinese leader called on other countries to collaborate on trade and pledged to "make China a mega-sized consumption powerhouse." Beijing tempers criticism of Israel. China initially pledged to support Iran shortly after Israel's attack on June 12. Despite that initial show of support for Iran, Beijing's rhetoric has shifted to become more China and Hong Kong stocks rose early Wednesday amid mixed trading in the region, as investors weighed a ceasefire between Israel and Iran, and fresh commentary from the U.S. Federal Reserve. Mainland China's CSI 300 was up 0.35%, while Hong Kong's Hang Seng Index — which includes major Chinese companies — had gained 0.77% as of 12:20 p.m. local 24 to June 27: The Standing Committee of the National People's Congress, China's top legislative body, meets to discuss a law on unfair competition, and review government spending. June 26: The Asia Infrastructure Investment Bank holds the opening ceremony of its annual meeting after appointing a new president for a five-year term starting January; Xiaomi to reveal the price of its electric YU7 SUV June 27: China industrial profits data for May June 30: China's official manufacturing PMI for June July 1: Anniversary of the ruling Chinese Communist Party's founding in 1921; Caixin Manufacturing PMI for June
Free Malaysia Today
11-05-2025
- Business
- Free Malaysia Today
Asean business council to push for business and graduate work visas
Asean business council chairman Nazir Razak said a lack of political will and capital had hindered the formation of an Asean economic community. (Bernama pic) KUALA LUMPUR : Asean business leaders are calling for the creation of an Asean business visa and an Asean graduate work visa to provide free movement of talented workers across the region. Nazir Razak, chairman of the Asean Business Advisory Council, said Asean's aspirations for an integrated economic community had been hindered by a lack of political will and capital. However, Asean business leaders still wanted skilled workers to be able to move freely across member states. He said the proposed business visa would allow employees of approved Asean businesses to work in any country in the bloc, while the graduate work visas would provide for a standard two-year stay after graduation. 'For example if you study in Malaysia, you will get an automatic two-year work visa (to work in Malaysia),' he said, adding that Singapore had a similar arrangement with the UK. Nazir said that the council will propose the Asean visa initiative at the Asean summit later this month. Malaysia currently offers a graduate pass that allows international students from 23 countries to remain in the country for a year after graduation and can further their studies, travel or work part-time. Separately, business risk analyst Ben Simpfendorfer said 'talent mobility' would be welcomed by businesses across the region. 'Making it easier for Asean talent to move to Malaysia is a major win,' he said. Simpfendorfer said Malaysia would have natural advantages as English is widely spoken, the country is culturally diverse, and living standards are good. 'Proximity to Singapore is a plus, and the talent landscape here can be a differentiator—especially as companies look to consolidate operations and reduce costs,' he said. Simpfendorfer said Malaysia should focus on attracting management and engineering staff. He said that as the manufacturing sector expands, companies would need people who can both operate and oversee complex systems. 'Technological roles, especially in artificial intelligence, will also be critical. That's going to be one of the most competitive areas globally.'
Free Malaysia Today
11-05-2025
- Business
- Free Malaysia Today
Go beyond assembly lines and semiconductors, Malaysia advised
Malaysia has been caught in isolated segments of manufacturing, says management consultant Ben Simpfendorfer, making it difficult to attract strategic investments. (Bernama pic) KUALA LUMPUR : Malaysia should broaden its manufacturing ecosystem beyond assembly lines and semiconductors to fully capitalise on foreign investments, according to an international management consultant. Ben Simpfendorfer, a partner at the consultancy Oliver Wyman, said solar panels, battery storage systems, heat pumps, and electrolysers are among the clean energy products that Malaysia could also start manufacturing given the huge potential they hold. 'There is a growing interest from Chinese firms in clean energy manufacturing,' he said. Simpfendorfer, who is also the head of Oliver Wyman Forum, the consultancy's think tank, said Malaysia has to move beyond basic assembly work and set itself up as a complete manufacturing hub. 'It shouldn't be just another stop in the process,' he told FMT. He said that while Malaysia has the opportunity to be a big winner in the reconfiguration of global supply chains, it needs to have a holistic master plan as well as an ecosystem that that has both breath and depth. 'That means building full vertical supply chains – not just isolated segments of manufacturing,' he said. Simpfendorfer said the time has come for Malaysia to act given that it has already attracted investments from companies aiming to build resilience in their supply chains, particularly in semiconductors. 'The foundations here are very strong as Malaysia has a solid legal framework and robust foreign investment policy incentives but there's obviously more that can be done. 'The next stage in the process is to focus on building the ecosystem,' he said. Simpfendorfer shared these insights after a roundtable in Kuala Lumpur with senior leaders from both the public and private sectors recently. He noted that while many are uncertain about near-term possibilities, and some sectors are still in the 'wait-and-see' mode, long-term prospects in the region remain strong. He singled out Malaysia as one of the countries that stand to benefit as supply chains are de-risked and Chinese interest grows amid global trade tensions. 'Malaysia has a unique window of opportunity as multinationals reconfigure their geographic footprints and rebalance supply chains,' he said. Simpfendorfer said Asean is increasingly seen as the place to be, with few other regions offering the same scale and manufacturing base, with Mexico being the only other exception. Last year, Malaysia crossed a milestone with RM378.5 billion in approved investments, the highest in the nation's history, with key strategic investments coming in from the US, Germany, China, Singapore and Hong Kong. Preparing to stay in high-tariff world He said some businesses are already making strategic plans to reconfigure their supply chains given that 'we are not returning to a low-tariff world'. 'With tariffs expected to be higher than before, now is the time to consider what future global supply chains might look like. 'Companies must plan for new trade corridors, such as China to Asean or Asean to India, and position themselves to capitalise on these opportunities,' he said. With this in mind, he said, more firms need to focus on identifying emerging trade opportunities and positioning themselves to make the most of future possibilities.
