Unit 3: Two Reasons India Will Overtake China By 2025

Interesting article HERE making big predictions about two of the BRIC economies, India and China. One of the major issues China faces (along with much of the developed world) is a declining birth-rate and an aging society and the strain this situation will put on the economy in terms of productivity and government finances. On the other hand, India has a young and vibrant workforce “giving India a very important advantage over China as it has a much healthier dependency ratio.” See graphic below.

Furthermore, the “IT services industry in India is thriving on their cheap labour costs, educated and English-speaking workforce, and their entrepreneurial bosses.”

It seems companies from developed countries are tapping into this resource and according to THIS REPORT, India was “ranked third place in global foreign direct investments in 2009 and will continue to remain among the top five attractive destinations for international investors during 2010-11.” With this in mind, perhaps such a bold prediction is not so far from the truth!

Unit 3: Starbucks, extending product life cycle & China

Howard Schultz talks in the video below about how Starbucks has performed strongly during 2010 and about his objectives for Starbucks’ growth in China.


You may remember the launch of Starbucks 'Via' - the brand’s first entry into the instant coffee market. 'Via' has proved a great success, conributing to 15% revenue growth for the firm in the USA and even stronger growth (21%) overseas.

Starbucks is aiming to triple the number of stores in China within the next 5 years - an incredible growth rate, if it can achieve this objective. Schultz admits that growing the brand in China will not be easy (the business has already been trading there for 12 years). Still, it looks like a tremendous opportunity

Here is the video interview:

Unit 3: EU, China & Import Tariffs

The EU imposes tariffs on imports from China, Vietnam and Cuba, because it considers that they are not market economies. The World Trade Organisation allows importers to place extra duties on goods which are being ‘dumped’ on the world market - that is, being sold at a price which is below the price in the country of origin. These two issues came together at the beginning of 2009, when the EU decided to impose anti-dumping duties of up to 87 percent for the next five years on screws, nuts and bolts imported from China - but in mid-2009 China claimed to the WTO that the threshold price had been wrongly calculated, and that the tariff breaks international trade rules.

Over a year later, the WTO has finally reached a decision in China’s favour, saying that the tariffs must be removed - marking a victory for China in its first WTO dispute against the European Union. In a trade dispute between the two, China has imposed its own tariffs on imports from the EU. This story, reported by the BBC and China Daily amongst others, gives evidence for the economic theory that import tariffs tend to lead to retaliation and there is a net reduction in trade - and also for the practical economics which shows that, however sensible the theory may sound, in practice countries often make decisions which suit their own domestic purposes.