Week 10 Blog Post

A recent plan has passed in Hong Kong to raise rent for low income tenants by 10%, to offset this increase the government has also supplied a stimulus to allow them to not have to pay this month's rent. The government in Hong Kong has already provided low income housing with 2 months of free rent, raising the total to 3 months on the year. The fact that low income tenants haven't had to pay a quarter of their rent this year has led to outrage across the region, and demanding them to pay. This stimulus does not come to much surprise after considering that median monthly rent in Hong Kong is a surplus of $1,500 compared to the $152 median average in the United States. This outrage has led to a public persecution of people taking advantage of welfare housing in this area.

This article is interesting because it shows another situation where subsidies are being misused and providing people with a way to take advantage, much like the Texas cotton situation presented in Rivoli's book.  This article is also interesting because it provides an interesting insight into the difference in the distribution of wealth between an area like Hong Kong and a much larger area like the United States. Welfare housing refers to a median of $150 rent a month, while in Hong Kong it applies to a median average of over $1,500, by considering these two statistics alone it is easy to see how the population of Hong Kong worth of public support is in a whole different bracket compared to the United States.

http://www.cnbc.com/id/47640064

Reflection

After going through 10 weeks of class and covering a wide variety of topics, it is not clear to me that the information about the financial crises that have occurred throughout history is the most applicable to understanding how the world works. This topic was something that was relatively unknown to me until this class, and after delving into a deeper dissection the problems with the global economy can be easy to identify after looking at these problems. A country could strengthen it's economy by strengthening domestic consumption while at the same time expanding trade routes.

After this class my interest in foreign exchange markets, arbitrage, and in the economy in Hong Kong in general.  I would really like to know more about how trading in foreign exchange markets works and how much of an opportunity there is to make a profit in these markets. I also have learned a lot about Hong Kong that I was unaware of and reading the articles about the economy has really provided me with a great opportunity to learn about the culture and country.

I would strongly recommend this class to anyone who is planning on studying abroad. It provides you with a great reason to actually do a lot of research about your country before you leave (and the due dates really give you a great incentive to not procrastinate about doing it). This class really taught me a lot about  Hong Kong and other foreign countries that I would not have ever been aware of without it. This class has been a great learning experience and I would definitely take it again knowing what I know now.

Week 9 Blog Post

Hong Kong's next leader is Leung Chun-ying. Leung is the son of a policeman and a true man of the people. He is a self made millionaire and was voted by a group of 1,200 political and business aristocrats to be the new leader of Hong Kong. One of the main promises of his election is to help diversify Hong Kong's export dependent economy. An economy based in exports is heavily dependent on the well being of the global economy, which leaves it susceptible to hardship through no fault of its own. This is why Leung has decided that Hong Kong needs to focus on domestic consumption to help to continue their streak of large annual growth rates. He also seeks to strengthen the relationship with Mainland China.

I found this article to be particularly interesting because the research I found for my paper about the effects of the 2008 global financial crisis on Hong Kong were very dependent on these aspects that he is trying to change. A lot of the government action that was taken involved diversifying the economy and strengthening the bond with the PRC, which was incredibly effective. So, it would seem that Leung is on the right track to keeping Hong Kong as one of the economic leaders in the world.

http://online.wsj.com/article/SB10001424052702304840904577423843918689920.html

Beware of Greeks Bearing Bonds

The most interesting part of the passage in my opinion was, "The Greek people never learned to pay their taxes .... because no one is ever punished. It’s like a gentleman not opening a door for a lady”. I found this to be the most interesting because it is a very simple way of explaining a rather complicated situation and is also something that everyone can relate to. Not only can it be applied to this economic situation, but it is applied in the daily lives of practically every human being. If someone is not forced to own up to their mistakes then the problem will never cease to exist and progress cannot be made. It also can lead to the problem becoming larger and larger until it is out of control, which is apparent in the Greece situation.


The situation in Greece is a problem for the European Union because in order to become a part of the EEU Greece had to demonstrate that it was qualified to be there. These same standards demanded by the EEU also led investors to believe that Greece was a safe, and reliable area to invest in, but through backhanded accounting techniques Greece was able to manipulate these numbers into something that the EEU considered acceptable. So, through this crisis the EEU lost some of its credibility considering that the actions Greece took now have came to light, and this lack of credibility paired with a decrease in overall investment in the Euro (also attributable to this situation) have led to the ultimate decrease in the value of the Euro as a whole.


National Income is equivalent to GDP= G + I + C + NE. An increase in taxes would result in lower consumer spending also paired with a decrease in G overall leads to a decrease in national income which is where the opposition comes from. Not only does this decrease in GDP look bad to the public but the public is also very unreceptive to the idea of paying additional taxes. These two combine factors help to explain the opposition.

London seeks lead role as China's currency goes global

This article is a summary of China's Yuan becoming increasingly global. Nearly two years ago the first transaction to ever occur in the UK that was paid for with Yuan occurred. This transaction was by Neill Tools in the UK to make a cross-border payment, which was initially assisted by the HSBC. As a result of this transaction the UK now holds 35 billion Yuan which is typically used by companies like Neill Tools who choose to pay their suppliers in that currency, which was unheard of previously. The article also entails that China is making a push to spread their currency globally, which is currently being dominated by Hong Kong, but is now making much progress in the UK. Also according to the article, the reasoning behind the UK's sudden interest in trading the yuan is in hopes of increasing incentives for China to trade with the UK, and this would provide them with a new avenue.

I found this article to be particularly interesting because it relates very closely with what we talked about on Friday in terms of the markets for foreign currency. One of the many functions of money is to store value, and as no surprise their are certain types of currency that are better for storing money, and in some cases that actually cause the value of your money to increase. For example, if you have a large amount of money in a currency from a small, unstable country like one in central Africa, then it would be more beneficial to invest that money in a more substantial currency like the euro, dollar, or now (in reference to the article) the yuan in order to protect this money from losing its value. Or to invest it in a market for these currencies that is likely to increase due to exchange rates.

http://www.bbc.co.uk/news/business-18149651

How Walmart is Changing China

There were a couple of things that I found to be particularly interesting about this article. First, I thought that the relationship between rising interest in China and a decreasing interest in the United States was intriguing. Much of the distrust for Walmart in America is that a majority of their products come from China and local stores are not able to compete, but this same logic makes Walmart more appealing to the people of China. Not only are they getting more affordable prices, but they are also supporting their country at the same time. Additionally, I found the information that they are able to trust the food supply of Walmart much more than other places to also be interesting. That is a problem that Americans don't often have to worry about, so it was interesting to hear about it from someone else's perspective.

Multinational Firms have many impacts on a country's culture, but none more important than their impact on the quality of goods demanded in that country. For example, if higher quality products are demanded in one nation the firm participates in, then they must raise the quality of their product in that nation in order to compete. By the one nation demanding a higher quality good it corresponds with all of the other nations also receiving a higher quality product. This is apparent in China in how the population now prefers Walmart food over many of their local markets because of the quality and safety.

Two of the largest impacts of multinational firms reside in the fashion and food industries. Since multinational firms are forced to compete in many different areas this spreads the popular culture from these areas all over the world. This explains a lot of the restaurants we have in America that offer food from all over the world, as well as mega-malls that offer clothing styles that are popular here and also around the world.

Hong Kong's Economy Slows in January-March

According to Bloomberg, the economy in Hong Kong has slowed in comparison to previous years. In the first 3 months the year-to-year growth rate was only .4%, in comparison to a 5% growth rate from the previous year.  Additionally, according to a survey from Dow Jones this is 1% lower than their predicted 1.4% increase in total growth for the quarter. This is being attributed to the banking crisis in Europe which has resulted in a 5.7% decrease in total exports for the quarter. In another note this low growth rate has erupted in public outrage as housing prices in Hong Kong continue to rise making it the most expensive place to own a home in the world, further increasing the gap in the distribution of wealth.

This article is particularly interesting because it is a good reflection on how global the economy really is at this point in time. A banking crisis in Europe does not only negatively affect the people there, but also everywhere that is connected to them through the now global economy i.e. Hong Kong. Not only is there the direct connection between the negative impact of the the euro-crisis and the exports from Hong Kong, but the economists in Hong Kong are also worried that this crisis might negatively impact the recovery in the United States, and thus hurt Hong Kong's exports even more. This all goes to show that in today's economy one place's problem often turns out to be everyone else's problem, too.

http://www.bloomberg.com/news/2012-05-11/hong-kong-economy-set-for-slowest-growth-since-2009.html