Message: 8 Date: Sun, 19 Feb 2017 22:52:40 +0530 From: Marshall Mendonza <[email protected]> To: goanet <[email protected]> Subject: [Goanet] Subject: Re: Trudeau Third World Leader to Meet Trump
M D'Mello: Chinese works on the strategy of mass production (less durable) and mass consumption. Main reason of their low cost is the low capital investment and export friendly policies of the Government in China. China is buying raw material from all across the world (has huge investment in resourceful Africa) and selling the end product back to the world. China is the second largest exporter in the world after Germany. It has been predicted that China will also cross Germany in the export by the World Trade Organization (WTO). Response: 1. It is true that India's trade deficit with China is increasing despite the Make in India campaign of the govt. That is because the campaign is all empty gas. Just PR and Headlines Management. It needs holistic solutions and vision for changes to happen. And changes do not happen overnight. 2. China has peaked and its economy is on a downside. There are many ghost towns in China with manufacturing operations closing shop. India was the only growing economy till Modi derailed it with his ill advised demonetisation. This has set the country back by at least 2 years. While no new employment has been created in 2.5 years, the unemployment has doubled during this period. 3. While Trump may have America's best interests in mind, the way he is going about things like a bull in a China shop, he is bound to collide sooner than later. 4. Shutting out foreign employees or foreign products will hurt the US more. Corporates run on profits, not sentiment. Many US companies have transferred their registered offices to Ireland to avail of tax benefits because tax rates in US are higher. Paying high wages to Americans will prove costly to US corporates and will hurt their profitability. It is possible that instead of foreign workers coming to the US, the work may be outsourced to employees based out of their home country. Regards, Marshall Response: Thanks Marshall for your comments. There are conflicting opinions out there including Modi’s ‘demonetization’ that has just happened very recently and repercussions if any would take time to reflect just as Trump’s presidency after 8 years of Democrat rule. However, I believe if this ‘demonetization’ eliminates CASH payment for turnkey projects, investments, housing, real estate, vehicles, gold, direct deposit of most employee salaries into bank accounts etc. this could bring in huge tax income to the government and liquidity to the banks. I was informed the banks were facing liquidity problem and ‘demonetization’ obliged citizens to deposit their ‘cash at home’ into the banks that replenished liquidity with the banks. You say demonetization has set the country back by at least 2 years. But demonetization took place just 3 months ago and have we seen any large scale bankruptcies, factory closures or a great depression since then? The impact should have been immediate. 2. China has peaked and its economy is on a downside. In 2013, underscoring the growing worries over China, Tom Orlik wrote in the March 26 (2013) issue of the Wall Street Journal: “Markets fear a slowdown in China’s factories. They should also be concerned about possible government instability.” This is 2017, has anything happened as speculated in 2013? China itself is the largest consumer market in the world although its shift away from export led growth is believed to be not working as hoped. Foreign Companies that want to sell to the Chinese must open factories to employ Chinese workers, share technology that allow Chinese to copy and sell cheaper. Chinese tech companies are quickly becoming world-class and dominating in consumer electronics. The Bank of China tightly controls the yuan to dollar value. For example, it manages the pricing of exports to the United States, making them a little cheaper than those produced in America. Remember Trump saying ‘Currency manipulation by China?’ 3. Trump said for US businesses thinking of moving their jobs abroad, there will be consequences, and this may include outsourcing as well. "They will be taxed very heavily at the US border if they want to leave." The air-conditioning company Carrier reversed its plans to close a furnace plant at Indiana and move to Mexico on promise that they would receive a $7 million tax incentive package (saving more than 800 American jobs) from the state of Indiana in exchange for making a $16 million investment in the facility. Trump is not intending to shut out foreign employees or foreign products. He does not want cheap foreign workers to replace US citizens and also likely provide incentive for local manufacture that will with-stand foreign competition. Ireland’s corporate tax rate is 12.5% that is one of the lowest in the developed world and would still come down to 6.25% that would apply to a tax category called knowledge development tax. Trump has promised a big cut in the US corporation tax rate (reportedly from 35% to 15%) and other measures to make it less financially attractive for companies to hoard money offshore but how far he will be successful and its impact on Ireland’s tax benefits to US companies is yet unknown. Of course Corporates run on profits not sentiment, but who benefits? More: http://www.bbc.com/news/world-us-canada-38173437 https://www.theguardian.com/world/2016/oct/16/taxes-panama-papers-trump-tax-havens Regards MD
