Governments are enamoured with manipulating the market. The irony is now the market is manipulating them. So the reality is that China’s slowdown is inevitable and it matters little what Wen says
Recently markets have been concerned about slowing growth in China. According to the data coming out of China, there is really nothing to worry about. Although China’s official purchase managers’ index (PMI) fell to 50.4 in May, it is still the sixth consecutive month above the 50 level indicating expansion. Still the trend does not seem encouraging. But not to worry, Premier Wen Jiabao promised that the government would pursue more proactive growth including additional spending on infrastructure and additional “fine tuning” of the economy. Most of the world’s economic experts have an almost religious respect for Chinese economic management and feel that there isn’t any problem. But are they correct?
China is also famous for being the factory to the world. Exports make up 30% of its GDP (gross domestic product). Although China is less exposed to a slowdown in places like Europe than countries like Korea where exports make up over half of the economy, it will be far more affected than the United States which exports only 13% of its products. So with the problems in Europe, it is hardly surprising that it reported exports rose only 4.9% from last year. This was quite a surprise to analysts who were predicting 8.5% growth. Exports actually have been slowing since the end of 2010.
The import numbers were far worse. The forecast was for growth of 10.9%, but China barely grew at all, only 0.3%. The imports are by far the more important indicator since China is supposed to be rebalancing its economy toward domestic consumption. Certainly Chinese consumers are not doing their part. According to a recent survey they were saving more not less.
But it is not just the Chinese numbers which are disturbing. China has been driving most of the growth in the world economy since the beginning of the Great Recession. Many other countries are highly dependent on its demand. Commodities, especially mining companies have been major beneficiaries. But now the boom is over. The price of metals is down more than 20 % from 2011 highs. The companies that mine the metals did even worse. The FTSE All-World mining index has dropped 31.8% from its peak in April 2011.
Copper is often called Dr Copper because the strength of the demand for copper is supposed to reflect the health of the world economy. In February 2011, the expectations about Chinese demand were so great that the price hit a record high, over $10,000 per tonne. It recently dipped below $8,000 a tonne. China imported so much of the stuff that it is re-exporting it.
According to China’s presumptive next president, Li Keqiang, the official GDP numbers were for “reference only”. To determine the real state of the Chinese economy, he relies on electricity consumption, rail cargo volumes and disbursement of bank loans. These indicators show trouble. Last April electrical production increased 11%. This year it increased only 0.7%. Rail cargo is growing but only half the pace of last year.
Real estate construction makes up twice as much of the Chinese economy compared to most countries, but housing prices are falling. Prices in Wenzhou declined by 12.3 %, Beijing declined 1 % and Shanghai declined 1.3%. March also saw a 50% decline in the sales of Chinese bulldozers.
China is supposed to be rebalancing its economy away from investment, by encouraging consumers to spend more, but the consumers didn’t get the message. Retail sales growth for April slowed 14.1% to a 14-month low
But not to worry. This week’s market turmoil has investors around the world predicting and expecting that central banks will step in with more monetary goodies. China is no exception. Even the IMF (International Monetary Fund) said that China “has room for a countervailing fiscal response and should use that space”. Wen’s remarks seemed to confirm this, but there is a problem. The irony is that China is already stimulating its economy and it is not working.
Recently the People's Bank of China delivered a 50 basis point cut in banks’ reserve requirement ratio (RRR), the third cut in six months. This is supposed to pump an additional $63 billion into the system. There is also a wide expectation of an interest rate cut. But it is not helping. The banks were supposed to lend 800 billion yuan in April, but they only managed 681 billion yuan ($108 billion). It is getting worse. Loan growth for the four largest Chinese banks in the first two weeks in May was exactly zero and there was a drop in deposits.
This is a major problem. The fiscal and monetary stimulus that everyone expects China to make has occurred and it is not working. Governments, and especially Chinese government, are enamoured with manipulating the market. The irony is now the market is manipulating them. So the reality is that China’s slowdown is inevitable and it matters little what Wen says.
(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at [email protected] or [email protected]).
Dissatisfied clients of placement consultants turning to this new form of recruitment
Ashish Kelkar who worked as a business development manager in a well-known MNC (multinational) security firm in Bengaluru smirks at the treatment meted out to him by placement firms. Ramarathnam P, who heads the marketing department of a pharma major in Bengaluru scoffs at the time that he wasted when he tried to source a few candidates from a placement firm in Bangalore. The dissatisfaction of people like Ashish and Ramarathnam is giving way to an emerging discipline of reference checking and screening of candidates. It also works out to be cheaper for the organizations.
Ashish says, “I approached a top placement consulting firm through their director. I met them in November and was promised that they would look at my profile. There was a face-to-face session where I felt the official was more interested in my organization than in me. She asked me to get in touch with her in January 2012. When I contacted her in January, she said that I will have to wait till March as that was the time companies would be looking at new recruitments. In March, she gave me an evasive reply once again. Of course, I was talking to other placement consultants as well. I realised that pursuing such consultants in placement firms such as Mafoi was a sheer waste of time. Luckily, I landed a job in May 2012 thanks to my active networking”.
Mukunda Hegde talks about his experience with another firm. Mukunda sent his resume to the bunch of executives calling themselves as consultants in the placement firm. There was no response. Finally, he decided to pull a fast one of them and masqueraded as an HR consultant from Australia who was looking to source candidates from Bangalore. Within 15 minutes, there were frantic calls from the office and confirmation of the appointment the owner. Mukunda has joined Tesco and no, it was through a referral and not through the services of a placement firm.
Another firm in Jaya Nagar, Bengaluru promises candidates job interviews after collecting a “nominal” amount of Rs.5000 as registration charges. They even claim that this fee is actually a tactic to screen candidates. But they do not assure you a job and there are no refunds in case you are not selected.
R Gnanaprakasam, who works in TVS Logistics, says that placement firms are those who offer you an umbrella when it is not raining and snatch it away when it rains cats and dogs. Neena, a consultant in Talent Mappers agrees that the credibility of placement firms has suffered due to people who are not serious about their profession. However, she says that the onus of getting a candidate a good job remains on the priority list of recruitment consultants. However, Neena is silent when we asked her about the lack of initiative on the part of placement firms to source job opportunities. Why do placement firms always wait for clients to approach them and do not find it necessary to approach clients on a pro-active basis?
Kabir Muthaih, a mechanical engineer feels that it is better to apply to companies directly rather than waste time pursuing such consultants. He does not rule out the nexus between HR managers and such consultants with cash changing hands.
As placement consultants in India have lost their credibility, a new process is slowly and steadily emerging. Some organizations are engaging specialist professionals (not head hunters) who specialize in screening and reference checking of candidates. The charges for such services are nominal. “These are early days, but this sort of service holds lot of promise”, admits Vasumathi Purushottam, a Bengaluru-based recruitment consultant.
HR manager Srinand Narang who is employed with a paint company in Bengaluru is open to such type of services. “Placement firms in Bengaluru have had a bad track record as far as our organization is concerned. If we can get something that is in-between, it is welcome”. So, how does this scheme work?
1. Organizations place an ad in the newspaper
2. Applications are received by the HR department
3. These are forwarded to the screening specialists
4. The specialists screen the candidates based on an agreed methodology with the client
5. The first list of candidates is prepared
6. A random check is done by the client to ensure fair play and justice
7. Once the list is approved, the specialists carry out reference checking and short-list the candidates based on the initial telephonic discussion with the candidate and his interest in the job opportunity
8. The interviews are then directly co-ordinated with the candidates by the HR department
9. A lump sum amount, irrespective of the salary of the selected candidate, is charged to the client for the expenses involved in processing the applications. This amount is nominal.
Durgesh Patil, senior HR Manager in an IT firm in Pune welcomes this fresh approach. “It saves time and is also cost effective. The scheme provides scope for conducting periodic checks to detect any bias. I am sure once there is mutual trust between the client and service providers, such periodic checks may be skipped. But this is much better than dealing with unscrupulous placement firms”, he concurs.
To reiterate, these are early days for such a specialist service, but if firms give this a serious thought, they will realise that this will turn out to be cheaper and more effective because the decision to weed out a candidate’s name from the list is based on a scientific rating methodology and is not dependent on individual bias. This also allows a lean HR structure within the organization.
The 117th workshop organised by Moneylife Foundation focused on how one can file a RTI application to get the best results
"There is a method and discipline to filing a RTI (Right to Information) application. The RTI Act is a very important one which can help our country become better" said Gaurang Damani, social and legal activist, who conducted this session on RTI, the eighth on the subject organised by Moneylife Foundation. He took up individual cases of the applicants and advised them on the best way they could frame their queries to get the details and avoid rejection.
In order to file a RTI application successfully one should be specific and concise, preferably keeping the description to a limit of 150 words. "Do not ask too many questions, especially if they are pertaining to different departments", said Mr Damani. This would delay the information even further and chances are one may get information that you may have not even asked for. The application should be grammatically and technically correct, he added.
Individual cases were also taken up and the applicants were informed how best they can go about to file their application. Cases are rejected for reasons as petty as using an expired notary stamp. Care should be taken that the stamp is dated less than six months ago. "Another way to get around this is to use a postal order", said Nagesh Kini, a chartered accountant and activist, who was a key resource person for this workshop.
Applicants were informed to do there ground research first to find if the information is available on the government sites. Even if it is not available, the process for searching for the information one may come across something that may be related and could make the RTI application stronger. This would help in filing the application and getting information that is not readily available.
In cases where the claims were rejected, the applicants were taken through the best way they can file the first appeal. One should by all means try to get the information here as a second appeal could stretch to two years. Many applications are rejected due to wrongly framed questions. Applicants were briefed to how to frame their questions to extract the required information. How the question is worded is of utmost importance.
Participants were able to draft and discuss their RTI application at the Moneylife Knowledge Centre. They participants were given a chance to clear their doubts after the seminar.
Moneylife Foundation has conducted several successful workshops to explain the RTI Act. Based on feedback from these workshops the foundation organised a RTI clinic to help people file RTI applications.
Format for RTI application:
Format for filing First Appeal:
Format for filing Second Appeal to Central IC: