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

By John Richardson WE wish our readers a great festive season and wish them all ...

Learn more
NEXT POST

SABIC'S Al-Mady Issues Europe Warning

28/12/2012

By John Richardson WE wish our readers a great festive season and wish them all ...

Learn more
More posts
China benzene spreads at ten-year low on misplaced trade deal hopes
19/05/2019

By John Richardson THE ABOVE chart shows that in April the average spread between CFR Japan naphtha ...

Read
Longer trade war: Impact in numbers on China polymers demand
15/05/2019

By John Richardson WE MUST now start to quantify the impact on the petrochemicals industry of no end...

Read
Plastics pollution crisis: Impact on polyethylene margins in 2022-2027
13/05/2019

By John Richardson ALMOST all countries late last week signed a UN deal to monitor the flow of hard-...

Read
China PE demand boom will not stop further margin declines
10/05/2019

By John Richardson CHINA’S polyethylene (PE) market is being temporarily weighed down by overstock...

Read
China holds all the petchems demand aces as it digs in for longer trade war
08/05/2019

By John Richardson THE STRENGTH of China’s position in the intensifying trade war is further under...

Read
President Trump’s Tweets increase risk of no trade deal until 2021
06/05/2019

By John Richardson THE PROSPECTS of a trade deal seem to have have faded into the distance as a resu...

Read
Pressure on US builds as PE exports to China tumble and EU considers tariffs
03/05/2019

By John Richardson DONALD TRUMP insisted in early March that he was willing to walk away from a bad ...

Read
China 2019 PE demand grows in double digits as PP struggles
01/05/2019

By John Richardson CHINA’S polyethylene (PE) and polypropylene (PP) markets continue to tell us so...

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