Saturday, August 20

EU slup hits street scavengers

0

The massive sovereign debt crises shouting out from European Nations are no more a surprise to many. After Greece went into a spiral of struggling measures to survive in the 17-nations conglomerate, Spain is showing its ugly head now with possibly more bailouts to be unveiled in coming months.

The UK economy announced moving into deepening recession after the third quarter of consecutive decline in gross domestic product (GDP) for the three months ended June 2012.

In eurozone, the 17 countries that use the single euro currency still face an uphill struggle to control their debts in spite of managing to slash government deficits to 4.1 per cent of economic output in 2011.

On the whole, European Union’s (EU) foreign trade deficit with China had decreased from 155.3 billion euros in the first 11 months of 2010 to 145.4 billion euros during the same period of 2011.

Since the third quarter 2011, China had announced economic slowdown in manufacturing. The industrial output dampened from 15.1 per cent in July 2011 to 9.5 per cent in July 2012. This year, China’s trade balance managed to widen in June 2012 at US$31.72 billion surplus after regaining footage from an earlier deficit US$31.5 billion in February 2012; exports were worth US$180 billion for two separate months in recent May and June.

Nevertheless, the quarterly GDP of China has been dropping from average 9.5 per cent in 2011 to 7.5 per cent in June due to shrinkage in manufacturing demands.

Today, China remains as the main source for EU imports of machinery, vehicles and other manufactured goods including domestic and office products. Unfortunately, the slowdown in demands in European territory has hit the toy factories, domestic and office accessories makers in China mainly located Guangdong province.

Till date, there is no official statistic on how many factories have closed down but media reports indicated few thousands have wound up their businesses.

The reason for shrinkage in manufacturing sectors boils down to many. A gradual increment of labour cost in China from the western pressure in lifting yuan value has made business maintenance a challenge for many small and medium manufacturers. The quality compromise of china made products of its durability also adds into the demise of many small industries. Ultimately, it is the reduce shipment from EU that puts a halt to making these fast moving consumer goods in China.

While the shipment slows from east to west, many re-cycling plants in Hong Kong dealing in paper scraps have been affected with shrinking business volume. On the back lanes, more paupers and old folks are suffering from the survival of picking waste papers and abandoned cardboards to exchange for their daily basic needs.

With lesser packaging waste and rising cost of business, about 400 paper recycling firms in Hong Kong have closed down since last year and moved to China Mainland. But even in Mainland, these business operators are struggling to fight against each other for lesser ‘abandoned supply’ in markets.

According to Hong Kong’s Society for Community Organisation that looks after social welfare for the under-privileged people, there are about 10,000 scavengers roaming in the street daily while more than half will survive from picking paper scraps for a monthly exchange of HK$350 (estimated US$40).  Sadly speaking, it is hard to imagine how much more they can suffer if the paper scraps become lesser in Hong Kong from a chain effect of euro slump and relocation of domestic re-cycling plant.

Definitely, it will make us frown to think how long will it take for euro debt crisis to be over. Otherwise, how will it affect Asia economy in the next two years before EU can even call it over and done deal in resolving the debt crisis? Do not underestimate the chain effect of euro slump that might be coming as direct impact to Asia soon.

Dar Wong is the Principal Consultant of APSRI. The expressions are solely his own. He can be reached at dar@pwforex.com