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The recently concluded Economic Times' Global Business Summit saw <keyword id="340442" type="PERSON" weightage="20" keywordseo="Andy-Xie">Andy Xie</keyword>, the former <a href="http://www.businessinsider.in/morgan-stanley-teslas-model-3-may-be-10x-safer-than-any-car-on-the-road-today/articleshow/57796203.cms">Morgan Stanley</a> and <keyword id="1823378" type="UNKNOWN" weightage="20" keywordseo="World-Bank-economist">World Bank economist</keyword>, calling India "one of the most closed economies of the world." <br />
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<strong>Also read: </strong><a href="http://www.businessinsider.in/world-bank-is-impressed-with-aadhaar-programme-says-beneficial-for-the-world-if-widely-adopted/articleshow/57665980.cms">World Bank is impressed with Aadhaar programme; says beneficial for the world if widely adopted</a><br />
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In an interview to TOI, Xie said India needs to embrace foreign capital to support its economic development.<br />
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"India needs capital to build the country and it is all about getting capital, whoever can give it to you, whoever can build for you, be practical. Be colour blind. Nobody is perfect, everybody has problems," Xie said.<br />
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<strong>Also read:</strong> <a href="http://www.businessinsider.in/boosting-private-sector-investment-remains-a-challenge-says-governments-chief-economic-adviser/articleshow/57887963.cms">Boosting private sector investment remains a challenge, says government’s chief economic adviser</a><br />
<br /> While advocating foreign capital for India's economic development, he mentioned that because of cheaper funding, new <keyword id="6357247" type="PERSON" weightage="20" keywordseo="Internet">internet</keyword> companies are taking away others’ business , even as their contribution to productivity is nil.<br />
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"Internet at this time is a huge bubble. You look at all the Internet businesses. They don't create anything. They are trying to redistribute existing businesses from their channels. People are pouring money into them like, Amazon is entering every business," said Xie.<br />
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<strong>Also read: </strong><a href="http://www.businessinsider.in/government-to-attract-62-billion-investment-from-indian-and-foreign-companies/articleshow/57537469.cms">Government to attract $62 billion investment from Indian and foreign companies</a><br />
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He also blasted Facebook, calling it a "distraction rather than disruption."<br />
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"Where is Facebook adding value? It is just taking advertising revenues away from established media outlets and it makes money because people are entertaining each other. You get them together, Internet is like hosting a party .Then you stick some commercials in between and you make a lot of money. People who used to provide the real stuff they are unemployed. The society has become a whole lot worse," he added.<br />
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On <a href="http://www.businessinsider.in/ecommerce">e-commerce</a>, he said that he doesn’t have any faith in the medium. "E-commerce is all about selling fake stuff. Any e-commerce business which is prospering must be selling fake stuff. You look at how they make money. The issue is interest rates have stayed so low for so long," said Xie.<br />
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Also read: <a href="http://www.businessinsider.in/e-commerce-market-to-touch-nearly-55-billion-by-2021/articleshow/57166251.cms">E-commerce market to touch nearly $55 billion by 2021</a><br />
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<em>(Image source: Financial Times)</em><br />
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Internet is like hosting a party and making a lot of money, says economist Andy Xie

<ul class="summary-list"><li>Starbucks' comparable sales in China are slumping, with a 14% drop in the most recent quarter.</li><li>Its then-CEO put it down to weak consumer spending and a coffee store "price war" in a July investor call.</li></ul><p><a target="_blank" class="" href="https://www.businessinsider.com/starbucks-traffic-sales-comparable-us-china-visitors-transactions-brian-niccol-2024-8">Starbucks</a> has been struggling in China.</p><p>Comparable store sales, a key measure for the restaurant industry, were down 14% in its most recent quarter.</p><p>China, the world's second-biggest country by population, is a crucial market for Starbucks. The coffee giant has <a target="_blank" rel=" nofollow" class="" href="https://s203.q4cdn.com/326826266/files/doc_financials/2024/q3/3Q24-Earnings-Release-Final-7-30-24.pdf"><u>more than 7,300 stores</u></a> there, nearly 20% of its total footprint — making China its second-biggest market after only the US. It's targeting <a target="_blank" class="" href="https://stories.starbucks.com/asia/stories/2023/starbucks-enhances-innovation-to-support-growth-in-china/">9,000 stores</a> by 2025.</p><p>Starbucks opened its first store in mainland China in Beijing <a target="_blank" class="" href="https://www.starbucks.com.cn/en/about/history/">in 1999</a>.</p><p><a target="_blank" class="" href="https://www.businessinsider.com/starbucks-reserve-roastery-shanghai-china-is-worlds-biggest-2018-4">Shanghai</a> was also chosen as the location of the <a target="_blank" class="" href="https://www.starbucksreserve.com/stories/hello-shanghai">second Starbucks Reserve Roastery</a>, after Seattle.</p><p>In mid-August, Starbucks named <a target="_blank" class="" href="https://www.businessinsider.com/starbucks-ceo-steps-down-replaced-by-chipotle-chief-2024-8">Chipotle CEO Brian Niccol</a> as its new boss in an abrupt management shake-up. One of his key priorities could be turning around its Chinese business.</p><h2 id="5529d4ab-9d0b-4d20-9223-34655e83b33d">Sales slump</h2><p>Starbucks' comparable store sales in China have been incredibly volatile over the past five years.</p><p>Comparable sales are determined by two components: The number of orders placed and the average order size.</p><p>In previous years, sales were massively affected by <a target="_blank" rel="" class="" href="https://www.businessinsider.com/china-protests-covid-lockdown-explainer-stakes-2022-11"><u>China's strict zero-COVID policy</u></a>. But in recent months, they've been hit by cautious consumer spending and increased competition, then-CEO Laxman Narasimhan told investors in July.</p><p>"Unprecedented store expansion and a mass segment price war at the expense of comp and profitability have also caused significant disruptions to the operating environment," he said.</p><p>Comparable store sales have been negative for the last two quarters. In the most recent quarter, to June 30, both the comparable transaction count and average ticket size were down 7% year-over-year. The average ticket size has been steadily declining over the past two years.</p><p>In particular, fewer occasional customers have been visiting in the afternoons and evenings, Narasimhan told investors in April.</p><h2 id="060c4243-77d8-4369-88a7-38a9fadab9f0">Increased competition</h2><p>The rapid growth of the coffee-shop sector in China means there's simply "too much competition," Sherri He, who leads the China unit of consulting firm Kearney, told Business Insider.</p><p>She said it was Starbucks' "number one challenge" in China.</p><p><span>Narasimhan</span> told investors in April that there was "fierce competition among value players" in China.</p><p><a target="_blank" class="" href="https://www.businessinsider.com/luckin-coffee-chinese-chain-making-starbucks-nervous-singapore-2023-11">Luckin Coffee</a>, Starbucks' biggest rival in China, has nearly three times as many stores as Starbucks in the country after monumental unit growth. Luckin was only founded in 2017 but it has <a target="_blank" class="" href="https://investor.lkcoffee.com/news-releases/news-release-details/luckin-coffee-opens-its-landmark-20000th-store-beijing">more than 20,000 coffee shops</a>, the vast majority of which are in China.</p><p>Luckin has a much broader presence across China than Starbucks, including in smaller cities, the analysts said. Nearly a quarter of Starbucks' Chinese stores are in Beijing and Shanghai, and the vast majority of its other stores are in tier one, new tier one, and tier two cities, according to a Bank of America report from April.</p><p>Other major competitors in China include Cotti Coffee, McDonald's McCafe, and KFC's KCoffee.</p><h2 id="7f36829d-72cf-4485-bc9e-7582b527c3ed">Not all Chinese consumers want the Starbucks experience</h2><p>Coffee is "still a growing habit" in China, Dave Xie, <span>a partner at Oliver Wyman focusing on consumer goods and retail, </span>said. "Lots of consumers just drink tea."</p><p>And when they do go to a coffee shop, they generally care much more about the product than the experience, Xie said.</p><p>"Starbucks is a consumer-centric company, but for Luckin it's really product-centric," Xie said. Luckin has a "very rapid product innovation cycle" with much more frequent launches than Starbucks, he said.</p><p>The Chinese coffee chains are much more "agile" at adapting to trends and cater more closely to the flavors favored by Chinese consumers, He, the Kearney partner, said. This includes Luckin's focus on sweet and milky beverages, with a brown sugar boba latte and a hugely popular coconut latte that accounts for 70% of sales at some stores, <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-06-06/china-s-luckin-coffee-lkncy-is-back-and-beating-starbucks-sbux">Bloomberg</a> reported.</p><p>Xie said that Starbucks' <a target="_blank" class="" href="https://www.businessinsider.com/starbucks-embracing-drive-thrus-and-mobile-over-traditional-mode-2022-8">"third place" model</a> — the idea that it's an alternative space to work and home for people to spend time — had worked in 2017 and 2018, when people were more willing to pay for premium products, but that this was no longer the case. Luckin, in comparison, has smaller-format stores with less seating and a focus on automation and standardization, he said.</p><div type="image" title="Customers line up at a Luckin coffee shop in Yanbian, Jilin province, China, July 16, 2024. On July 19, 2024," height="3024" width="4031" msid="112739533" hostid="261" sizebytes="406810"></div><p>Starbucks executives have repeatedly told investors that its premium positioning in China is a crucial part of its strategy. But because of this, Starbucks is limiting its potential customer base.</p><p>Starbucks is "not targeting the mass but the middle class," in particular white-collar professionals, He said.</p><p>Starbucks typically charges between 30 and 40 yuan ($4.20 to $5.60) for a 16-ounce drink, including Americanos, flat whites, flavored lattes, teas, and Frappuccinos, according to its <a target="_blank" class="" href="https://www.starbucks.com.cn/en/menu/">website</a>. In contrast, Luckin often has promotions that discount it down to 10 yuan a cup ($1.40), He said.</p><p>"We're not interested in entering the price war," Starbucks China CEO Belinda Wong <a target="_blank" class="" href="https://s203.q4cdn.com/326826266/files/doc_events/2024/01/1/SBUX-Q1-2024-Earnings-Call.pdf">told investors</a> in January. "It is our aim to be the best and lead in the premium market."</p><p>But <a target="_blank" class="" href="https://www.reuters.com/business/retail-consumer/china-starbucks-tries-avoid-price-war-gets-dragged-into-discounting-2024-05-27/">Reuters</a> reported in May that Starbucks had significantly increased its use of discounting in China to compete with local rivals. Wong <a target="_blank" class="" href="https://s203.q4cdn.com/326826266/files/doc_events/2024/01/1/SBUX-Q1-2024-Earnings-Call.pdf">acknowledged</a> in January that Starbucks' use of promotional offers in China had led to lower average check sizes.</p><h2 id="b005dbb0-5953-4baa-b378-4adbe7fe5594"><strong>Economic growth is slowing, and consumer spending is growing more cautious</strong></h2><p><a target="_blank" rel="" class="" href="https://www.businessinsider.com/china-economy-second-quarter-gdp-growth-weak-demand-consumption-exports-2024-7"><u>China's economic growth</u></a> has slowed. It grew just 4.7% year-over-year in the second quarter of 2024, missing forecasts.</p><p>"China's obviously a tough market, and it's not just Starbucks," Brian Yarbrough, a restaurant analyst at Edward Jones, told BI.</p><p>Luckin's same-store sales were down more than <a target="_blank" rel=" nofollow" class="" href="https://investor.lkcoffee.com/static-files/ec2bafa0-1543-4d62-811d-7115a4349c5c"><u>20%</u></a> in its two most recent quarters.</p><p>Consumers are "increasingly rational and pragmatic," Xie said. This makes the price gap between coffee chains an even "bigger challenge" for Starbucks, He said.</p><div type="image" title="Staff members work at a Starbucks store in downtown Shanghai, east China, Sept. 27, 2022" height="2591" width="3768" msid="112739530" hostid="261" sizebytes="445164"></div><h2 id="d2465509-1a5e-4882-8ccd-74af5a947267">Starbucks remains optimistic</h2><p>Starbucks executives say the chain is focused on its long-term plan in China.</p><p>Narasimhan <a target="_blank" class="" href="https://s203.q4cdn.com/326826266/files/doc_events/2024/01/1/SBUX-Q1-2024-Earnings-Call.pdf">said</a> in January that Starbucks was focused on offering more coffee-forward, locally-relevant products in China and opening stores in smaller cities "where we see meaningfully stronger new store economics." </p><p>He noted that the company was "well on track" to meet its 2025 target of 9,000 stores in China.</p><p>Starbucks added <a target="_blank" rel=" nofollow" class="" href="https://investor.starbucks.com/news/financial-releases/news-details/2024/Starbucks-Reports-Q3-Fiscal-2024-Results/default.aspx"><u>more than 800</u></a> new Chinese stores in the year to June 30. The chain has continued to grow in China "in the hope that there's some market shakeout," but in the short term, "it's a pretty tough road that they're going through right now," Andy Barish, an analyst at Jefferies, <a target="_blank" class="" href="https://www.businessinsider.com/starbucks-traffic-sales-comparable-us-china-visitors-transactions-brian-niccol-2024-8">said</a>.</p>

China is Starbucks' 2nd biggest market, but sales are slumping. Here's why.

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><p class="source">REUTERS/China Daily </p></div><p></p></div>The bottled <keyword id="15300" type="ENTERTAINMENT" weightage="60" keywordseo="Water">water</keyword> business has boomed in <keyword id="1334" type="COUNTRY" weightage="60" keywordseo="China">China</keyword> as concerns about <a href="https://www.chinadialogue.net/article/show/single/en/6074-Half-of-China-s-urban-drinking-water-fails-to-meet-standards">contaminated water sources</a> persist.</p>
<p>Sales of bottled water are expected to <a href="http://www.bloomberg.com/news/2013-01-10/nestle-taps-china-water-thirst-as-west-spurns-plastic.html">surge to $16 billion by 2017,</a> from $9 billion last year, according to Euromonitor International.</p>
<p>"This water story illustrates how much <a href="http://english.caixin.com/2013-11-19/100606806_2.html">China's economy is distorted by unhealthy government power,</a>" writes Andy Xie, independent economist and former Morgan Stanley chief Asia-Pacific economist, in Caixin Online.</p>
<p>Environmental <keyword id="13001" type="COMPANY" weightage="60" keywordseo="pollution">pollution</keyword> has caused people to eschew tap water for bottled water. Xie attributes the pollution to the local governments' desire to draw in investment as turning a blind eye to the pollution lowers production costs. From Xie:</p>
<p style="padding-left: 30px;">"As demand for bottled water grows, of course, it is an investment opportunity, too. Hence, the safety of bottled water becomes an issue. If one is willing to sacrifice the environment to attract investment, why not lower the standards for bottled water? That is indeed a serious issue. Consumers have to guess which bottled water is safe.</p>
<p style="padding-left: 30px;">"A further story is how bottled water has become a source of revenue. As some suppliers have become successful in the market, governments find it more profitable to tax them. Hence, the price of bottled water is rising."</p>
<p>This additional revenue also goes towards investment, as local governments have thus far focused on feeding the beast and meeting GDP targets.</p>
<p>The bottom-line according to Xie, is that all of this is done to "satisfy the government," and the real reform that China needs is limited government control.</p>

The Booming Bottled Water Business Represents Everything That's Wrong With Government Regulation In China

<p><div class="KonaFilter image-container display-table float_right click-to-enlarge"><div><div class="image on-image"><a title_source="REUTERS/Fabian Bimmer " title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/5485e251dd08954f628b457f-960/christmas-bear-bearish.jpg"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span>REUTERS/Fabian Bimmer </span></p></div><p></p></div></div>A lot of banks and consultancies have now released their outlooks for 2015. There's a lot to look forward to. The US economy is more healthy than at any time since the crisis, and the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> is following close behind.</p>
<p>But not everything is exactly rosy. Analysts and economists are pointing to some major crisis threats that could derail the warm, Christmassy glow of recovery.</p>
<p>Here are the three bearish scenarios likely to be keeping investors up at night over 2015.</p>
<h3>A Chinese Credit Crisis</h3>
<p>The possibility of a rapid slowdown and crash for China could have been included in any list of risks for at least the last six years. So far, it's the dog that didn't bark, and people who keep forecasting it have looked more like doom-mongers than wise sages. But economist Michael Pettis thinks the idea of hard and soft landings is misplaced, and that it's better to think of it as the <a href="http://blog.mpettis.com/2014/09/what-does-a-good-chinese-adjustment-look-like/">two ways the Chinese authorities could decide to deal with an inevitable growth slowdown</a>:</p>
<blockquote>
<p>Beijing can manage a rapidly declining pace of credit creation, which must inevitably result in much slower although healthier GDP growth. Or Beijing can allow enough credit growth to prevent a further slowdown but, once the perpetual rolling-over of bad loans absorbs most of the country's loan creation capacity, it will lose control of growth altogether and growth will collapse.</p>
</blockquote>
<p>China's credit growth has been extremely fast, and with Beijing cutting interest rates and Chinese equities going parabolic, it certainly doesn't look much like the state is gently managing the situation. <a href="http://blog.mpettis.com/2014/10/how-to-link-australian-iron-with-marine-le-pen/">In a separate post,</a> Pettis offers this ominous warning: </p>
<blockquote class="blockquote">
<p><span>I have studied most of the major growth miracles of the past 100 years (and directly experienced some), and in every case there have been pessimists that predicted a difficult adjustment process with much slower growth. ... that the pessimists have always been wrong, it always turned out that they were wrong because <span style="text-decoration: underline;">actual growth turned out to be much worse than they predicted.</span></span></p>
</blockquote>
<p>Pettis does not <em>expect</em> that the government will handle the slowdown in a disorderly way. But for more pessimistic observers, a major slump could see the world deprived of a major source of demand, which there's precious little of anywhere at the moment.</p>
<p><strong>Here's a chart from Nomura showing that Chinese debt has accumulated very rapidly since the global financial crisis:</strong></p>
<p><div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Nomura" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/5485e251dd08954f628b457e-960/screen shot 2014-12-08 at 4.50.46 pm.png"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span>Nomura</span></p></div><p></p></div></div></p>
<h3>An Old-Fashioned Emerging Market Debt Crisis: </h3>
<p><a href="https://www.bis.org/publ/qtrpdf/r_qt1412_ontherecord.htm">Claudio Borio, current head of economic and monetary analysis the Bank of International Settlements</a>, think the strong dollar is going to threaten the debt burdens of emerging nations - and cripple growth there. <span>There's some basic but powerful logic here. In a lot of countries around the world, particularly in the developing world, it's common for companies and banks to borrow in dollars. So although their day-to-day business might be denominated in pesos, or dinars, or francs, their debt levels depend on how strong that currency is against the dollar.</span></p>
<p>So when the dollar falls, it's good news! Your debts are getting smaller in real terms. You need to earn less of your domestic currency to repay them. When it rises (<a href="http://uk.businessinsider.com/the-dollar-is-surging-2014-12">like it's doing now</a>), that isn't good news at all! You need to earn more and more to pay back your debts.</p>
<p>This wouldn't be the first crisis in emerging markets linked to the strength of the US dollar: the Asian crisis in the late 1990s and the Latin American crisis of the 1980s were both spurred by dollar bull markets. Andy Xie, the former Morgan Stanley economist, <a href="http://english.caixin.com/2013-02-04/100489386.html?p2">noted that the coming strength of the dollar would be unpleasant for emerging markets</a>.</p>
<p>What's more, this year's Geneva Report (an annual study) noted that there is a lot more debt in emerging markets than there was at the start of the crisis. While emerging nation stock markets have barely grown (they're actually smaller than they were in 2007), debts have surged.</p>
<p><strong>Debt crisis, in other words, is a bigger systemic risk than an equity collapse in emerging markets:</strong></p>
<p><div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Geneva Report" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/5485e250dd08954f628b457c-960/screen shot 2014-12-08 at 4.11.14 pm.png"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span>Geneva Report</span></p></div><p></p></div></div></p>
<h3>Euro Crisis Round Two</h3>
<p>Europe really can't handle any more big shocks. The currency union is struggling to generate any visible growth or inflation, and this is meant to be a recovery. It really seems unlikely that the eurozone could weather any major negative economic surprises without slumping into recession and deflation.</p>
<p>Maybe the most obvious catalyst is back in Greece: the current government has to nominate a president in February, and it doesn't look like it has the votes. To install a president, the coalition would need the support of 180 MPs, not the 155 that it currently has.</p>
<p>If it can't get the votes, <a href="http://uk.businessinsider.com/a-new-political-crisis-is-hammering-greek-stocks-2014-10">a snap election would be won by left-wing radical party Syriza</a> (based on current polls). The party is in favour of serious bondholder haircuts and abandoning the bailout deals that have been negotiated with international authorities. That would almost certainly send bond prices crashing and yields surging for Greece like they did in during the crisis (rapidly raising the cost of issuing debt). Syriza aren't the only new anti-austerity party leading in southern Europe: <a href="http://uk.businessinsider.com/spains-podemos-party-takes-polling-lead-2014-11">Podemos are in the lead in Spain</a>.</p>
<p>Here's Citi's global outlook for 2015 on the rise of anti-establishment parties on both the left and right in Europe:</p>

<p><strong>Podemos has captured the public debate in Spain, and is dipping in and out of first place in political polling:</strong></p>
<p><div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="BNP Paribas" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/5485e251dd08954f628b457d-960/screen shot 2014-12-08 at 4.47.15 pm.png"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span>BNP Paribas</span></p></div><p></p></div></div></p>

You Searched For "Andy Xie" and got 4 results

Internet is like hosting a party and making a lot of money, says economist Andy Xie

BI India Bureau

China is Starbucks' 2nd biggest market, but sales are slumping. Here's why.

Grace Dean

The Booming Bottled Water Business Represents Everything That's Wrong With Government Regulation In China

Mamta Badkar

Three Nightmare Economic Scenarios That Could Trigger Recessions In 2015

Mike Bird

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