Friday, September 09, 2016

China sneezes, and the world gets the shivers!

Every once in a while, I wonder if I might open up the blogging window ... and draw a blank.  What if I don't have anything to write about?

And then I laugh. Hysterically.  Because, the world story is full of strange twists and turns, and I love making meaning out of them.  In fact, making meaning is what education and learning are all about--not some stupid diploma that ain't worth even wiping one's butt.  (BTW, please do not use your diploma to wipe your butt--I assume that the paper will be way too rough and it won't absorb either ... hahaha!)

Consider the craziness in shipping.  On the one hand, we need ships to transport goods all over the world.  On the other hand, old ships that are no longer useful need to be put to death.  Right?

The Chinese economy has been messing with both.  Yep, both the shipping business and the ship-breaking business.

First the shipping story.  In case you missed it, the big news is that Hanjin has declared bankruptcy.
Last week, South Korean shipping company Hanjin, the world’s seventh-largest container line, filed for bankruptcy after failing to reach an agreement with its creditors to alleviate its $5.37 billion in debt. This has left 85 of the 97 container ships the company operates literally stranded at sea, as ports refused to admit them for fear that stevedores and tugboat crews won’t be paid. Even if the situation is resolved soon, the unprecedented mess is an ominous indicator about the state of global trade.
You are thinking, 'hey, that's a South Korean company, and what has China got to do with this?'  If you thought so, then you are my kind of a thinking person.   Good for you!

What happened?  Oversupply.  Yep, way too many ships out there.  Because you are a thinking person, your next question is, 'hey, but in this global economy aren't we making something somewhere, and selling them somewhere else?'  Yes.  But then think about who makes them.  Ahem, China.
“Hubris and ego and insanity in the shipping industry,” says Baker. “It happens over and over again, cycle after cycle. Thus it was and ever will be.” The arms race was ignited by wildly optimistic global trade forecasts made in the waning days of the global recession, notably by Denmark’s Maersk, the world’s largest shipping company. What they didn’t count on was China’s recent economic slowdown. “We had a generation of people working in shipping that have lived under the China effect,” says Baker, referring to the years when the country’s construction boom and skyrocketing manufacturing sector kept the global commodities market humming. “To a large degree, everyone thought it would remain like that.”
China's economy slowed down.  And now ships are stuck at sea!

So, what has this got to do with the ship-breaking industry?  Interestingly, not too long ago, South Korea was the place where ships went to die.  Then, Korea became rich and this activity moved to places like India's Alang.
In the world’s biggest ship-recycling yard, dozens of men toil under a blazing sun, carving up the remaining portion of a vessel on the seashore. During the nearly five months it has taken for the ship they are working on to arrive at the yard and get broken apart for scrap, the price of the steel the yard is culling has skyrocketed, then plummeted—dragged along by roller-coaster trading thousands of miles away in China.
Yep, China's economic slowdown is affecting even the ship-breaking industry.
Many of the yards here, in the western Indian state of Gujarat, are saddled with losses from buying near-record numbers of boats when steel prices were surging earlier this year, then selling the scrap metal after prices had crashed.
You want more, right, because you are now fascinated?
One yard owner, who asked to remain unnamed, said he bought a ship in January for around $280 per ton, including the cost of labor. He ended up selling the scrap metal at a loss, for $250-$260 per ton, when the ship was being broken up in April and May.. 
Ultimately, it is the human interest in the story that we need to think about:
In the rows of wooden shacks that house thousands of workers at one yard in Alang, many men are waiting without pay in case more ships arrive, but face the prospect of returning home with no money for their families.
Sushil Kumar Pal, 20, is worrying about money for his two younger brothers’ schooling and for his elderly parents.
“There are so many workers here and not enough jobs going around,” he says. “So how will anyone work?”
It is one crazy world out there.  Those of us who are comfortably retired, or with secure jobs, have it easy.  The rest are, in some way or the other, at China's mercy.


Ramesh said...

Of course China is a major economic player and what happens in China affects all of us everywhere in the world. That is one of the reasons why you should turn your attention to Chinese politics. The world is obsessed with your Presidential elections, but almost nothing is being said about the Chinese "elections" which are going to happen a year from now. A new Standing Committee will take charge and it will give clues to the question - After Xi who ? Or even if there is going to be a After Xi. The Beidaihe conclave a few weeks ago would have been a significant event in the buildup. That this is all shrouded in secrecy and we have to read the tea leaves to discern what's going on makes it all the more interesting.

Get on to Chinese politics and start blogging about it my friend. Here's the title of your next post. Will Li Keqiang continue as Premier come October or will be be sacked ?

Sriram Khé said...

The world is messed up, my friend. You and I have the priorities right. (well, except your sports addiction!!!)

You remember as kids we used to know the names of important world leaders? It shocks me now, and depresses me to no end, that most students now would not be able to name the Chinese leader. Even when they know darn well that China is one important player not merely in the global economy but in all things global.

Here's the reason, I think: It is racism, even if well under the radar. The global outlook continues to be Euro- and North-American-centric.

Academics, too, mostly do not care. I have complained for years that colleges continue to "teach" students a curriculum that does nothing to help students prepare for a world in which their fates are decided by China, India, and others. It is a terrible disservice to students. If at all, the curriculum is about one course in Chinese history a thousand years ago--as if the glorious days of China ended then!

"Or even if there is going to be a After Xi" is not a comment that Donald Trump would even remotely begin to understand. As the old saying goes, "Yathaa raajaa, thatha prajaa" (the people are like their king) ... I hope Pattabhiraman sir does not find fault in my quoting from the Sanskrit ;)

I won't blog about China per se because I lack the content within me to offer anything even remotely meaningful. You are the China expert--too bad you have stopped blogging. Shame on you for watching the US Open and not blogging about China! ;)

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