1. The Atlantic – Walmart and China have launched a bold experiment in consumer behavior and environmental stewardship: to set green standards for 20,000 suppliers making several hundred thousand items sold to billions of shoppers worldwide.
With some 30,000 Chinese factories making things for Walmart, the company’s future was tied to China in the most elemental way. So Scott and his team knew that Walmart could never truly “green” its supply chain without taking on its Chinese partners. But, if China was going to be the laboratory of the future, it was difficult to imagine how even Walmart could wrangle such a far-flung and disparate range of suppliers into a responsive group.
Dealing with China’s out-of-control industrial pollution has in many ways been far harder for Walmart than greening its agricultural product lines. One thing the company did early on was enlist the help of NGOs to monitor and train workers at its suppliers’ factories. This was a bold move, especially in a country where not only are NGOs still relatively undeveloped, but the government and the Party have a deeply ambivalent relationship with civil society.
Walmart has many programs to help advise suppliers on how to reduce energy and water use and reduce emissions. One supplier Loftex has invested more than 4 million RMB (about $650,000) and cut electricity use by 25 percent and water use by 35 percent, achieving its 2012 energy-reduction goals a year ahead of schedule.
“I think there is enough evidence that China is heading for a soft landing simply because the country has a lot of levers to pull and an enormous labor pool it controls,” he says.
A number of fund managers like Jim Chanos and economists, including Nouriel Roubini, say that China’s economy is either crash landing, or risks a crash landing within the next three years if it does not control spending on fixed investment like real estate.
China spent over $700 billion stimulating its economy after the 208 economic crisis hit the U.S. and Europe. Much of that went to fixed investment like commercial and residential real estate. Money was lent to states to invest and some of that went to projects that have not paid off. Small and mid-sized developers are losing money. Some will go bankrupt.
“Still, I would say that China has the power to just forgive those loans and band-aid the situation if needed to protect its economy from a hard landing,” he says. “The credit bubble in China is not the same as the one we experienced in the U.S. That popped because of mortgage backed securities and collateralized debt obligations and those markets don’t exist by comparison to the U.S. ”
China’s “hard landing” has begun, said Chanos, adding that consumption as a percentage of gross domestic product is dropping and that fixed-asset investment is the driver of the Chinese economy. “Most China observers were not talking about any landing three months ago and now they are confidently talking about a soft landing.”
Real estate transactions in the past two months, in the so- called tier-one, two and three cities the firm tracks are down 40 percent to 60 percent year on year, said Chanos.
“The property slowdown or worse has started,” he said. “The question is how it’s resolved.”
Unlike some other China bears who are predicting a major slowdown for China’s economy in 2013 or after 2014, Chanos could be proved wrong sometime in 2012. Chanos is calling hard landing or worse now.
Soft landing seems to be staying over 7% annual GDP growth. Beijing has signaled it is ready to sacrifice some growth. Its annual growth target is 7 percent over the five years to 2015, down from 7.5 percent in the last five years.
Also, China’s economic growth is expected to moderate by about 1% of GDP growth every 3 to 5 years. So the definition of hard or soft landing will change the further out you go.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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