Pesek on Asia: Qantas Gets Junked
Good morning. Here's my take on some of the stories driving the debate in politics, finance and social issues across Asia today:
Qantas gets wings clipped.
Australia's iconic Qantas is officially in the junk bin. A month after Standard & Poor’s yanked away its investment-grade rating, Moody's followed suit. In its action today, Moody's cited a "sharp deterioration" in the carrier's core domestic business amid growing competition from Virgin Australia. And you know what? Qantas CEO Alan Joyce deserved it as he dragged his feet on raising competitiveness amid a strong dollar and high costs. While Virgin Australia bought smaller rivals, added business-class seats and built swanky airport lounges, Qantas stayed on the business-innovation tarmac and lost altitude. And it faces more turbulence ahead as a Chinese slowdown crimps demand.
Is Chinese deflation on the way?
The longest slide in China's producer prices since the 1990s raises myriad questions about the trajectory of the world's second-largest economy. But here's one rarely entertained: could China be heading in the direction of sustained deflation? The producer-price index dropped 1.4 percent from a year before in December, the 22nd straight drop, and consumer-price gains trailed estimates at 2.5 percent. As President Xi Jinping retools the economy and the central bank intensifies its war on shadow lending, unbalanced and aging China could indeed face some Japan-like challenges over the next few years.
Is democracy 'dead' in Bangladesh?
In a troubling Financial Times interview, embattled Bangladeshi opposition leader Khaleda Zia declared: "Democracy is not in Bangladesh right now. It’s dead now.” The country's fragile electoral system at least appears to be on death row following Sunday's election. Prime Minister Sheikh Hasina Wajed ordered security forces to take tougher measures against opponents after she won a second five-year term in a boycotted contest that saw more than a dozen people killed. Expect further disruptions in the world’s second-largest garment exporter, which supplies retailers from Wal-Mart to Gap, as nationwide strikes slam the economy. “We want a free, fair, credible and participatory election … as early as possible,” Zia told the FT. I fear she'll have a long wait.
Free trade bumps into multipolar world.
When people call Pascal Lamy "Mr. Doha," it's not clear whether it's meant as a compliment (for his devotion to free trade) or an insult (for his failure to achieve much of it). In this Project Syndicate op-ed, the former director general of the World Trade Organization (2005-2013) makes yet another impassioned case for the magic of free trade. He also offers suggestions for how to revive a movement that's lost great momentum since the 2008 crisis -- like getting developed nations to give developing ones longer transition periods to lower tariffs. Let me suggest another: Just admit the Doha round is dead and start over. It's the economic equivalent of the Kyoto environmental treaty -- dead, and no one wants to admit it.
Abenomics still getting thumbs down from Japanese.
Heizo Takenaka, a star economist in Japan, thinks the Nikkei 225 Stock Average could exceed 18,000 (it's 15,880 today) as Prime Minister Shinzo Abe's pledges to revive the nation gain momentum. If only the person in the street cared. In this Japan Times poll of random workers, you find a common denominator: many of the consumers Abe needs to excite are either uncertain or downright dubious about living standards improving. Here's a sampling: "Abenomics is nothing but an empty slogan for the Liberal Democratic Party, and it has had no positive effect on our daily life." Ouch!
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)