The Challenges For 2013

Business, China, Company Strategy, Economics, Europe, US

G20%20Dec12.pngBy John Richardson

WE wish our readers a great festive season and wish them all the best for the New Year. We will take a break and resume the blog on 28 December.

We really do wish we could be a great deal more optimistic, particularly at this time of year.

2012 has been a difficult year and we worry that next year will be equally, if not more, challenging.

The challenges in 2013 may include:

*Political and social instability in China. There are no guarantees that China’s new leaders will, or even can, get it right.

*Even if the reform process is smooth, China faces what is likely to remain a weak export market, overcapacity across many industries, including even excavators, and the possibility of a US sub-prime style financial sector crisis.

*Spain might well have to default on its debt in 2013. “They’re going to have to ask for help, and they’re going to look for all sorts of things to call the restructuring – something other than the word ‘default,’, but it’s mathematical: they just simply can’t pay for it. They’re going to have to have major reformation. Mariano Rajoy is really in deep trouble because he has no easy solutions,” writes John Mauldin, the economist and financial writer.

* Everything is connected in this globalised world, of course, and hence China will struggle to revive its flagging export trade unless Europe bounces back, but this isn’t going to happen in 2013 as Europe’s problems will likely take at least a decade to fix. Further, Mauldin points out: “One of the things that we don’t think about is how important European banks are to world trade – especially the French banks. They finance a great deal of world trade. They finance a lot of the trade that our country uses when they go internationally. All of these things are connected, and we have to find new ways to do things.” France faces deep economic problems, including a debt-to-GDP ratio of 89.2% and unemployment at 10.2%.

*The US is politically dysfunctional. Sadly, the Presidential election solved nothing. Even if it gets past the fiscal cliff, sensible policies necessary to balance the budget, involving sufficient tax rises and spending cuts, seem unlikely.

Underpinning all of this is demographics. The global economy has lost its suspension.

Demographics drive demand and until or unless policymakers deal with this, we will continue to struggle.

The chart above, from fellow blogger Paul Hodges, looks at the G-20 nations who comprise 79% of the global economy.

The Y axis shows GDP/capita in US$, with the X axis indicating the median age for each country. The blue bubbles are the size of each country’s economy versus the US.

The countries fall into three distinct groups:

*Rich but Old. These wealthy countries have median ages mostly over 40 years.

*Poor but Young. These relatively poorer countries have median ages around 25 years.

*Poor but Ageing. China and Russia are in their own group: China because it has lost 400m babies due to the one child policy; Russia because of its high cigarette and alcohol consumption.

PREVIOUS POST

US Support For Big China Shale Gas Challenge.....

21/12/2012

……..Significant Commercial Production “At least Ten Years Away...

Learn more
NEXT POST

SABIC'S Al-Mady Issues Europe Warning

28/12/2012

By John Richardson MOHAMED Al-Mady, the CEO of SABIC, told the Financial Times y...

Learn more
More posts
Polyethylene producers must avoid repeating the mistakes of Q1
05/06/2020

By John Richardson AFTER a very challenging first quarter, nobody wants to make further write-downs ...

Read
China’s PP production growth could lead to big declines in 2020 imports
01/06/2020

By John Richardson PLEASE DON’T say I didn’t warn you. China is rapidly moving towards polypropy...

Read
Coronavirus, impact on the developing world and the scale of demand losses
29/05/2020

By John Richardson ALL OF us are struggling to come to terms with a collapse in the global economy t...

Read
Coronavirus, reshoring and the polyester industry: Good luck with that
27/05/2020

By John Richardson POLITICIANS, not just including the Populist variety, are talking a lot about res...

Read
Beware of the fragile nature of the oil and petrochemical price recovery
22/05/2020

By John Richardson RECENT rises in oil and petrochemicals prices should not in my view be taken as a...

Read
China petrochemical inventories build on what could be false hopes of a V-shaped rebound
19/05/2020

By John Richardson AS PETROCHEMICALS storage space in China fills up on the hope that the country ca...

Read
Further polyethylene rate cuts seem inevitable with no certainty on who will blink first
18/05/2020

By John Richardson IT IS NOT just a razor-like focus on petrochemicals demand that will get you thro...

Read
What petrochemical companies must do to adapt to a smaller coronavirus economy
15/05/2020

By John Richardson PETROCHEMICAL companies can adapt to the coronavirus New Normal by running their ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more