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Chamber Programmes

U.S. Economic Outlook
A Bull on the Run

Harmen Overdijk's outlook for the U.S. economy is bullish.

"Consumer sentiment is high, the housing market remains strong and recent figures show corporate spending is increasing," says the Chief Investment Officer of MeesPierson Asia. "But most importantly, we are still seeing impressive productivity gains in the U.S."

Speaking at the Chamber's November 26 roundtable luncheon, Mr Overdijk said he expects the strong economic growth in the U.S. to continue over the next three years.

His bullishness stems from lean-and-mean corporate America's productivity gains, that will push up corporate earnings and in turn drive the stock market.

As for the sluggish employment market, he attributes this to more firms outsourcing work, especially the manufacturing sector, which again leads back to productivity gains.

"Here in Asia, I think we will profit most from the strong U.S. economy as demand increases," he said.

The booming economy in the States may push the forecast for inflation higher than the official 1.8 percent forecast. Mr Overdijk says it could rise to as high as 3 percent, especially if the government maintains its current weak dollar policy, which will make imports more expensive to buy.

One of the main growth factors of the U.S. economy in the late 1990s was prolonged deflation in Asia, including China. Now that the Asian economies are stabilising, and China's years of deflation look to be on the verge of inflation, costs for U.S. importers can be expected to rise.

None of this will slow the U.S. economic too much, he says, but three other threats to destabilise this growth stand out.

"The main threats to the U.S. economy are high consumer debt, weak employment, and the large current account deficit, which they are financing by printing money to weaken the U.S. dollar," he says.

After almost one year of strong growth, the job market in the U.S. should be far stronger than the current 6.1 percent unemployment suggests. Economists' estimates that there should be more jobs in the U.S. is another sign of the productivity gains in the economy and outsourcing manufacturing processes to countries like China and India.

As for the record federal deficit, he believes U.S. President George Bush is using China and the issue of revaluing the renminbi for his re-election ambitions.

"The reason has more to do with politics than what makes economic sense," says Overdijk. "The only benefit would be short-term in that domestic sentiment would improve, which would be very good for Bush's political gains. But for the longer-term, it does not make economic sense."

Speech    Q & A    Slides    Webcasting

Expanding European Union
Catching the Next Phase of Global Growth

Richard Burton brought music to members' ears on December 9. To confirm that we weren't hearing things, he put a very attractive graph on the projector screens in the Chamber theatre.

"Every eight or nine years, the global economy experiences periods of strong growth," says the Regional Managing Director for Coface in Greater China, "and we now look to be just entering a new phase of growth."

The peaks and troughs spanning the past three decades clearly show that we indeed do look to be on the mend, and current market indications back his prediction. Let't hope he is right.

An added bonus to this new round of growth will be a decline in asset risks and prompter payments from buyers. For businesses that do business within Asia, which has the lowest non-payment rate in the world, that may seem like no big deal. But for those businesses trading with the U.S., the news is long overdue, because since the turn of the millennium, Coface's non-payment index shows the United States has been running among the highest non-payment rates in the developed world.

He also predicts the upswing will ease non-payments in new Central and Eastern European countries, which have tended to be quite volatile in the past. Reduced payment risks and stronger economic growth, together with their expected membership into the European union this year, will present new opportunities for Hong Kong businesses, says Xavier Farcot, Deputy General Manager of Coface Hong Kong.

To join the EU club in 2004, candidate countries -- Cyprus, Czech, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia (Bulgaria, Romania and Turkey are aiming for 2007) -- must align their import rates with those of other EU members.

"Products of particular interest to Hong Kong manufacturers include watches, which now must pay between 20-35 percent to enter Poland, for example. That will be reduced to the EU rate of 4.5 percent," he says.

Other interesting areas include clocks, toys games and sporting goods, which are currently slapped with a 12 percent tariff (EU countries pay 0-4.7 percent), and imitation jewellery, which will go down from 21 percent to 4 percent in Poland.

"There is also rising import demand for other light consumer products in these countries," he says, "as consumers are increasingly opting for a better living standard."

Mr Burton's Speech     Mr Farcot's Speech     Q & A    Slides   
Webcasting

Full list of Chamber programmes in December >>