Norris, McLaughlin & Marcus

REWIND: International Business News #23

  • India has had much economic progress, but recently such economic growth has slowed. Unfortunately, the decline in India’s economic growth is distributed unevenly, with India’s poor feeling the brunt of this burden.  If this decline continues, millions of Indians will fail to rise above the extreme poverty level.  There are many factors which have attributed to this slow down.  One factor that contributed to the slow down is India’s less than positive attitude towards foreign businesses and investments.  For example, the government is considering enacting a retroactive tax on foreign businesses for previously earned income.  Further, India’s service based industry (i.e., call centers) may have reached its peak.  Additionally, the legal system in India has proven to be complex and difficult to reform.  India is not the only country experiencing an economic slowdown as the economies of Brazil, Russia and China have also slowed.
  • The Hong Kong Stock Exchange has a giant IPO market, accounting for 60% of investment banking revenue in Asia.  However, new strict securities rules could impact this market.  The new securities regulator Ashley Alder recently proposed new securities rules that would impose criminal liability on banks and underwriters that sponsor companies which make false misleading statements to investors. The newly proposed rules are the result of investigations by the Hong Kong Securities and Futures Commission, which found that the due diligence conducted by underwriters in connection with IPOs has been substandard, resulting in untrue statements in company prospectuses.
  • The Federal Reserve Bank has approved of the expansion of three banks owned by the Chinese government into the United States.  This is a huge milestone as Chinese banks for years have sought access to the U.S. banking system as a means of financing Chinese companies, but such expansion in the U.S. had been impeded.  The Federal Reserve was reluctant to give their approval of such expansion as it had concerns about the adequacy of Chinese bank supervision.  Now, by allowing such expansion, the Federal Reserve has essentially given its nod of approval of China’s banking system.  Allowing Chinese banks into the U.S. banking industry enables the Chinese to further engage in business in U.S. and European markets.
  • In an effort to restore confidence in its banks, European governments may need to give the European Union more power.  The current banking system in Europe relies on the coordination among national supervisors; however, this approach has not been successful.  An alternative to consider is an integrated approach to overseeing Europe’s banking system.  The reassessment of Europe’s banking system comes in the wake of Spain taking a controlling share in its third largest bank and the country’s largest real estate lender, Bankia.  In order for the banking crisis in Europe to be resolved, it may require the governments of Europe to relinquish part of their national sovereignty and integrate their banking systems.
  • Although Germany has the largest European economy and the fourth largest market worldwide, it may not be able to escape the recession that has spread across Europe. Unlike Spain and Greece, Germany has a relatively healthy economy and has not needed to subject its economy to austerity measures. However, the austerity measures taken by other European countries have lead to a general economic downturn across Europe. Such a downturn has taken a toll on German’s export driven economy and it is unlikely that domestic consumption would offset such decline in exports. Nonetheless, because Germany’s economy is competitive; any potential recession in Germany would likely be short lived.
  • In an ongoing effort to bring business, particularly international business, to New Jersey, the New Jersey Economic Development Authority (“EDA”) has approved of an incentive package to lure Peapod, the online grocery seller, to New Jersey. The EDA approved of a $34.6 million incentive which would allow Ahold Ecommerce Sales Co., the parent company of Peapod and a subsidiary of a Dutch retail giant, to lease part of a distribution center located in Jersey City.
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    One Response to “REWIND: International Business News #23”

    • BobG says:

      I like your picks Wendy. Good info on the Chinese bank approval, the German eoonomy and NJ’s EDA $$.

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