Global Economy Faces Challenges
Episodes: Length (25:10)
- Introduction of Global Economy
- How do we deal with the challenges in the Global Economy?
- What are the opportunities for our entrepreneurs?
- Tips on facing Global Economy as an entrepreneurs
The global economy refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved.The global economy has changed significantly over the past few decades, in the way that it is organised and governed by collaborating nations. These changes have repercussions that not only affect the flow of goods and services between countries, but also the movement of people. As we’ve seen on occasions over the last century, too great a fluctuation in this international economic system can lead to a global economic crisis. So what exactly is the global economy, how does it function, and how does it affect our lives?
- How do we deal with the challenges in the Global Economy? [1:48]
Ray : Global economy challenge is really a big and hot topic these days. It’s relevant to everybody in our world. The word “Globalisation” itself doesn’t have a definition really. Some people support globalisation saying it helps to facilitate goods, money, people and knowledge mobility, while some people say it makes richer gets richer, poor gets poorer. It’s quite a controversial issue in a sense.
Globalisation seems to be contemporary for most of us. However, in fact, being globalisation has been an idea from many years ago. The story behind was originally about trade. Scientists discovered that in 2000 years ago there were already cross-border trading between the East and the West. I am sure many of you already heard of that, that’s the Silk Road. As time goes by, trade volume increased tremendously, and it led to trade imbalance. Some countries lost tremendous amount of silver, gold to others. Therefore, conflict arose. In b the 18th century, the problem intensified as we had the industrial revolution, which greatly improved the productivity. Because of overproduction in certain counties locally, they started to find ways to expand overseas and entered other countries market. I think that was the time that globalisation really begin. Unfortunately, globalisation in the last first half century was coming along with 2 world wars. There were too many reasons combined together that created the war, and it seems that ,even though it’s a minor element, globalisation was one of the factors. After the second world war, new international organisations were created to shape a new world order. United Nations, International Court of Justice and the International Monetary Fund were created in 1945. More international organisations were formed in the last second half century, such as The Organisation for Economic Cooperation and Development formed in 1961 and World Trade Organization in 1995. These are all the efforts devoted to have an intention to create a fairer world.
Now, almost 20 years were passed in our 21st century, We have enjoyed a peaceful environment for several decades. The world economy has been growing rapidly. Also, thanks to the birth of the internet, the communication among people becomes incredibly efficient. It makes the whole world to integrate at a fastest speed ever. People are connected instantly by sending emails, text messages through whatsapp, wechat, skype, you name it. We can do business with customers all around the world, and work with our colleagues all around the world as well without any obstacles, just like what Tammy and I are doing exactly right now. As an individual, you can purchase a T-shirt on Amazon US and have them arrived in Hong Kong the other day just because the T-shirt was manufactured in Shenzhen, China. Also, the mobility of people has greatly enhanced with all the high-speed train, roads, and more frequent international flights. For example, Tammy can actually book an early flight tomorrow morning to Hong Kong, and enjoy a English afternoon Tea with me, then go back Philippine to have dinner with her family just in the same day. You can imagine how amazing our world is now.
However, a coin always has 2 sides. We have seen a more serious phenomenon of wealth inequality. Especially here in Hong Kong, the problem is really obvious. Some people are only able to afford to rent 1 bed in a crowded old-industrial building, while some are having over a hundred apartments receiving a million HKD rent per month. It’s really sad and unfair to be honest. Recently, we have seen people are grumbling jobs being stolen by other countries, houses being bought by foreigners for speculation and make money. Populism is rising, and all these are leading us into a bigger conflict, trade war, potential currency war or even another big financial crisis.
2. How do we deal with the challenges in the Global Economy? [12:21]
Ray : I think what our world really needs is sustainability. We need to see things in a longer term. If our world is still in a situation where the rich get richer and the poor get poorer, then it’s not sustainable. Being not sustainable means conflict keeps happening forever. As a matter of fact, while we still need to work towards the goal of being as a one world. Some protection still need to be uphold. We often strive to achieve an open economy for our world. That’s why we talk about Free Trade Agreement, right? Here in Hong Kong, we set a good example as being an open economy. We have no tariffs or duties on most imported and exported goods. We have free flow of capital, talents and information. We also have a low profit tax system, and we don’t have taxes on dividend payout too. It sounds like everything is so beautiful for entrepreneurs. However, tension & conflict keeps continuing here. That’s why I said some protection still need to be upheld, such as a better distribution of wealth or redistribution of wealth. For local people living here, what we face is incredibly expensive property price and rent. Teenagers face critical difficulty if they want to start their own business because of intense competition from global players, while at the same time they need to afford the high rent, high living cost etc. If the cost of failure is so high, nobody would want to take risk or be innovative, and it would create a vicious cycle. I think the solution is to have a better distribution of wealth really.
When you mention trade tensions, fiscal and financial risk, they are all interconnected to each other. Trade tension happened because of this. At first, due to low production cost in some developing countries, sizeable manufacturing businesses in developed countries started to move their production line into those developing countries, and exported their products back into their home countries in order to make more money. As time goes by, small manufacturing businesses in the developed countries found it more and more difficult to compete with those low-price products, they decided to close down their factories, and do something else. Usually real estate would be a good option because they have the land, and can borrow money from the bank to finance the project easily. Banks are also happy because they find it difficult to make money by lending to manufacturing businesses, and it’s easier to make money by lending to property developers. In addition, the government also feel happy because they can receive money by selling more land to property developers. As property market keeps heating, it created a bubble, and most people find it difficult to afford such living cost, and they feel dissatisfied. Also, when the property prices and rents are so high, businesses are also harder to make money because of high fixed costs. More businesses were closed, and no more new buyer would be able to afford the skyhigh price, especially they are also worried about losing their jobs. In the end, many people cannot repay the debt and the financial bubble burst. After several big financial crisis cycle happened over the century, people in developed countries seem to realise that manufacturing industry is actually important for a country because it makes the economy more balanced. Therefore, they start to ask for those manufacturing production lines to move back, and have financial resources back to production, but not financial speculations such as creating property bubbles again and again. We will need time to see if production lines would really go back, but all in all, I think wealth redistribution is the key to solve all those problems. To be more specific, a wealth redistribution among different countries and within the country itself are both important.
Opportunities are always there, even though I expect the global economy would face difficulty for some time. I think a new way of manufacturing will be more and more popular. Especially, the 3D printing makes manufacturing to be closer to consumers. In the future, consumers are more easily to manufacture items themselves or they can buy items from nearby 3D printing stores. I think the manufacturing supply chain would be scattered around and more personalised items are expected. The traditional model of central manufacturing of prototype products will fade away, though not in a short period of time. In this case, the future manufacturing businesses will be focusing more on the domestic market or even just the nearby region. I think this is also what the developed countries are closely watching, and trying to rebalance their economy.
3. What are the opportunities for our entrepreneurs? [21:37]
Ray: Opportunities are always there, even though I expect the global economy would face difficulty for some time. I think a new way of manufacturing will be more and more popular. Especially, the 3D printing makes manufacturing to be closer to consumers. In the future, consumers are more easily to manufacture items themselves or they can buy items from nearby 3D printing stores. I think the manufacturing supply chain would be scattered around and more personalised items are expected. The traditional model of central manufacturing of prototype products will fade away, though not in a short period of time. In this case, the future manufacturing businesses will be focusing more on the domestic market or even just the nearby region. I think this is also what the developed countries are closely watching, and trying to rebalance their economy.
4. Tips on facing Global Economy as an entrepreneurs [23:32]
Ray : In economic and financial difficult time, entrepreneurs who have a nimble structure would survive. I think entrepreneurs should spend time on doing research during quiet moments. Wait until the booming moment to come back again, and start investing then.