Dr. Scott MacDonald's blog

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The Global Rollercoaster and Chinese Business

Chinese business has come a long distance. Throughout the first seven decades of the 20th century China was largely inward looking and disrupted by political fragmentation, famine and foreign invasion. Although Mao Zedong reunified China, it was Deng Xiaoping’s rise in 1978 that made the economy a central priority, perceived as a useful vehicle to pull millions of Chinese out of poverty and restore China as a serious international power. Two short decades after Deng, Chinese business, both state-owned and privately held, began to stride in significant numbers on to the international stage.

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Corporate Rationalization and Iron Ore Miners: Tough Times

The global iron ore mining industry is undergoing a major rationalization, which emphasizes the importance of corporate flexibility in the face of changing market conditions. Iron ore industry prices have fallen from over $130 per metric ton (CFR Tianjin Port prices) at year-end 2013, hitting their lowest level ($89) in almost two years in June. Numerous analysts expect that prices will stay below $100 for the rest of 2014 and possibly 2015, as well. A major driver of this price plunge is oversupply, partially caused by the ramping up of production by the major multinational corporations (mainly Australian and Brazilian) that dominate the business.

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Asian Corporations, Middle East Oil and New Geopolitics

The Middle East’s new geopolitics are creating a more challenging environment for Asian corporations. While Iraq’s future viability as a state is questionable due to the June battlefield successes of the Islamic State of Iraq and Syria (ISIS), more terrifying is the Sunni extremist movement’s incitement for a broader regional Sunni-Shia civil war. Add to this the potential fragmentation of Yemen and Libya and the ongoing brutish civil war in Syria and we are left to ponder - will a new round of instability spread into the major oil-producing states in the Persian Gulf?