201509 CM September

INTERNATIONAL TRADE
THINGS CAN'T GET WORSE?
THE headlines declare Greece escaped
again. In fact, things have definitely got
worse. First of all, Greece did actually
default on its debt; that is crossing the
Rubicon, even if the compromise agreement
means it no longer matters.
Secondly, this time round the EU actually
created a Grexit plan. Again, that's crossing
the Rubicon – a country exiting the euro
is no longer unthinkable, but something
for which a plan exists. That makes it far
more likely that even if Greece doesn't quit,
another country might – and don't forget
Spain has elections coming up this year,
with anti-austerity party Podemos looking
likely to win a good share of the vote.
GREECE has been front page news as the
renegotiation of its troika loans developed
into a Mexican standoff. But if you ask me,
the top story now isn’t Greece – it's China,
where a full-blown stock market crash
has shown up the widening cracks in the
Chinese economy.
We already knew there was plenty of
debt out there. Chinese investors have
been borrowing madly to put the money
into property and into the stock market,
which allows margin trading (that is, only
paying a percentage of the cost of the
shares bought). Coface already put China
on negative watch in January, and has now
downgraded the country, its major concern
being the amount of both public and private
debt (in China, it's not always that easy to
distinguish the two).
Private debt rose from 130 percent of
GDP in 2008 to 2007 percent in 2014 –
though that's still lower than Japan or the
UK, it's the speed of the rise that is the
concern.
The worst thing about the stock market
crash is that the market fell 30 percent
despite everything the Government
could throw at it – increasing margin
requirements, suspending trading, banning
BREAKING THE CHINA
HIGH LOW TREND
GBP/EUR 1.4410 1.3964 Down
GBP/USD 1.5677 1.5436 Up
GBP/CHF 1.5407 1.4810 Up
GBP/AUD 2.1527 2.0879 Up
GBP/CAD 2.0602 2.0122 Up
GBP/JPY 195.1887 191.1926 Up
major shareholders from selling, and
cracking down on short selling. That's the
worst of both worlds – it leaves Chinese
investors feeling scared that the market is
out of control, while showing the rest of the
world that despite claiming it’s reformist,
the Government remains interventionist by
nature.
Yet the most recent GDP figures
show the Chinese economy maintaining
its seven percent rate of growth in the
second quarter – admittedly helped by four
successive interest rate cuts and a sterling
contribution from the financial sector. For
the moment at least, the Government has
avoided a hard landing.
But the problems of too much debt and,
many suspect, property and stock market
bubbles, remain. If China does falter, it
won't only be China that suffers – other
Asian countries and even some African
ones will see their exports to China fall,
and many will also find Chinese investment
in their infrastructure and industry is no
longer available. Keep a very close eye on
what's happening on China – if you export
to emerging markets, it could be far more
important than anything happening in
Greece.
FOREIGN EXCHANGE SPECIALISTS
FOR THE LATEST
EXCHANGE RATES VISIT
CURRENCYUK.CO.UK OR
CALL 020 7738 0777
Currency UK is authorised and regulated
by the Financial Conduct Authority (FCA).
NEWS IN IN BRIEF
INTEREST RATES
THE world is splitting in two. Over here
and in the US, interest rate hikes are
moving closer, with the Fed expected
to increase rates and Bank of England
governor Mark Carney telling the
Treasury select committee that rates will
move up in the medium term.
On the other hand in Asia, there's
a whole lot of rate-cutting going on –
China has cut rates three times since
November 2014 to try to prop up the
stalling economy, while India, Indonesia,
Korea, Thailand, and Australia are all in
rate-cut mode.
That's sure to result in currency
fluctuations – as well as stock market
wobbles. So keep an eye out for
movements in sterling and the dollar
against Asian currencies. Easy to
forget if you've been concentrating on
sterling's inexorable rise against the
euro.
PAY UP OR ELSE
ONE of the difficulties of ensuring you
collect your money on export orders
is the fact that different countries have
very different payment and enforcement
systems. That's trickier than dealing with
customers in the UK where you know
just how to get them to pay up.
Fortunately help is at hand. Atradius'
International Debt Collection Handbook
is now in its ninth edition and covers
40 different countries. It doesn't just
tell you the law, either, but gives an
idea of expected costs and the likely
timeframe if you have to go to court –
very useful when you have to decide on
a course of action. And even better, it's
free, downloadable from the Atradius
website.
DOWN THE PAN
I was amused by the story of Essexbased
Drugloo, which makes what it
calls Banned Substance Recovery Units
(the company name tells you all you
really need to know). It has exported
for 15 years – mainly as a result of
customers recommending its products
to other law enforcement organisations
– but has speeded up its international
growth by getting UKTI to help identify
new target markets. It's now received an
order from the Greek drug squad – quite
a coup considering the state of Greek
government finances!
The recognised standard in credit management
www.cicm.com September 2015 43