Why a US crisis is good for China - Paul French

Paul French

Never short of a provocative statement, our Chinabiz Speaker Paul French argues in his Access Asia Weekly update why a possible economic collapse of the US economy would be good for China, despite having a trillion or so in US dollars and other paper assets.

The other week, we made the argument (which apparently surprised a few of you) that the current vocal crop of China nay-sayers were ignoring a raft of economic evidence and that the economy is in pretty good shape, and holding up well, despite exaggerated consumption numbers. But, said a lot of you, what about the coming American recession? Won’t that throw one almighty spanner in the works? Well, by way of an answer, we say no, and we have one word for you if you think American’s cutting back on spending will cause the roof to fall in here – Japan.
Why Japan? Well, quite frankly, we are old enough, and very long in what is left of our teeth, and we remember when you could shop all day in a booming Tokyo and never see a Chinese made product. Japan boomed and China didn’t get much of the action. When Japan went pop, consumers traded down, ¥1,000 stores and discounters boomed, cheap-and-cheerful chains such as UNIQLO flourished and stores filled up with made-in-China goods. Put simply, the Japanese recession was good news for Chinese manufacturers.

His argument: a crisis in the US will have similar benefits for China's manufacturers.

Home Depot's unlikely road to fast profits

Paul French

Home Depot started this week its operation in China, US media report, after revamping a Chinese chain Home Way they bought last year. Unlike the common practise during this kind of presentations, the media report of the Washington Post actually played down the likability Home Depot would be making a profit soon in this very competitive market. The operation counts now 12 stores.

The media actually asked retail expert Paul French, one of our speakers at Chinabiz Speakers, to play down the expectations even more.

"With the number of people moving into apartments in China over the past few years, [home-improvement stores] should have made fortunes, but nobody has because of the low, low prices and the lack of profit margins," said Paul French, a Shanghai economist with Access Asia, a consulting firm.
Although B&Q, a home-improvement chain that is a subsidiary of Britain's Kingfisher
Group, entered China in 1999, "they have only begun to see a dribble of profits over the last 18 months," Mr. French said.