U.S. Faces Emerging Economic Challenges

The U.S. recovery was tentative to begin with, but now prospects are looking a little bit worse; European turmoil and Chinese belt-tightening are jeopardizing the recovery. Europe's economy is uncertain due to concerns over Greek's elevated public debt; which could indirectly hurt the U.S. growth prospects as it would increase the U.S. dollar but damage the U.S's export market. U.S growth also hinders on trade with China; and China, in an effort to prevent inflation and its own housing bubble may be purposely halting its expansion; once again damaging American recovery hopes. It seems the U.S. may need to find a new way if it hopes to recover fully.

China May Revalue the Yuan

China needs to do something to slow down their quickly growing economy so as to deal with the consquences of inflation; that something may be the revaluation of the Yuan. Goldman Sachs believes that China could possibly allow the RMB to strengthen by as much as 5%.

China's Trains Steal Airlines' Customers

China's bullet trains are making it very difficult for airlines in stay afloat along certain routes. The trains travel at speeds of 217 mph, which is forcing airlines to cut prices for flights up to 80%, which may eventually force airlines to cut these routes entirely. The evolution of trains will most certainly lead to much harder times for the airline industry.

E.U. Considers Lifting Arms Embargo on China

Recently, in the hope of appeasing China, the E.U. has been considering lifting the arms embargo it placed on the nation in 1989 after the Tiananmen Square protests. The E.U. considers that lifting the 20-year-old embargo would be of great significance to the Chinese government, especially now that China is furious that the U.S. has decided to sell Taiwan $6.4 billion worth of arms. China, however, feels that lifting the embargo is nothing more than a symbolic gesture, signaling the E.U.'s acceptance of China as an equal player on the world stage.

Lifting such a ban would not be a simple thing to do though, as a strong resistance is already developing. Many countries are worried about China's behavior towards Taiwan and are reluctant to get involved in a potential arms race; others worry about the fact that China is still providing weapons to violent nations like Zimbabwe and Sudan, who continue to commit or support violence against civilians; more are worried that dropping the embargo would raise tensions with the United States; others feel that Europe is deluding itself to believe that China will accept them as an equal partner and probably will just continue to probe the E.U. for weaknesses that it can play up. China has long noticed problems between the E.U. nations and tried to exacerbate them, and many realize that if the E.U. can move forward it has to have a united front, otherwise China can and will best them; a dangerous proposition.

The proposal was brought up by the current Spanish presidency which lasts until July 1st. It will be interesting to see if the nations can unite on one front by then.

January a Good Month for Employment

Almost surprisingly, the U.S. economy may have added jobs for the second time in three months, in January. Payrolls apparently rose by 15,000 workers in January after having fallen by 85,000 in December. Some companies like Cisco Systems are planning to increase their staff as businesses update equipment and stimulus plans revive sales.

Manufacturing as well has been expanding, driving up the economy and its recovery, hopefully resulting in more factory jobs. It is expected that manufacturing payrolls will have dropped by 20,000 in January, which is the lowest its been since December 2007.

Death of U.S. Manufacturing to Bring U.S. Downfall?

Lynn Tilton, the CEO of Patriarch Partners, believes that if manufacturing in the United States dies, the nation will go down with it. Although many think of the United States as being based on the service industry Tilton mentions in an interview with TechTicker that most empires have fallen due in part to the death of the nations' manufacturing. She notes that U.S. manufacturing makes up 12% of the United States' economy and that many people in that industry are not able or meant to work in the service industry, therefore a manufacturing downfall would lead to the unemployment of many more millions of Americans, which will ultimately harm the rest/all of us.

Tilton has noted that it will be extremely hard to convince manufacturers to stay in the United States, especially when they can go to a third world nation for much cheaper, but she adamantly tells that it can be done with a little innovation. Hopefully companies will heed her words and try to keep manufacturing in the U.S.

Recession Leads to Radical U.S. Manufactuting Shifts

In the wake of the global economic recession manufacturers are beginning to restructure their businesses. Moves are accelerating the United States' manufacturing economy's long-term shrinkage. Manufacturing is now moving away from heavy sectors like cars and basic chemicals towards higher-tech products like computer chips. Car manufacturers in particular are shutting down facilities or investing in smaller, more-efficient facilities; chemical makers are moving their labor-intensive operations to countries with lower wages. As a result of the shifting, economists are expecting that unemployment will remain high for the next several years.

China Developing New Foreign Policy

As a rising superpower, China is branching out its foreign relations policies to unexpected places. China recently promised a $1billion loan to the former Soviet state of Moldova, a nation that is poorer than most African countries. The $1billion loan is the equivalent of one tenth of Moldova's GDP.

It is an interesting place to be investing such a large sum of money into, as on the surface it doesn't seem to have all that much to offer. What the country does have though adds up to enough reason for China to take interest. Moldova sits up in the top half of nations ranked for information technology potential by the World Economic Forum; China sees that by giving loans to nations such as Moldova they gain a substancial amount of global influence, especially pertaining to Russia. By building substancial influence in the nations surrounding Russia the Chinese are able to gain leverage in negotiations with Moscow, something of great importance to the Chinese because of China's dependency on Russian oil.

China could also focus on Moldova's agriculture, wine and textile sectors. These sectors and the country's comparatively low wages have already attracted a series of European manufacturing companies. It is also highly unlikely that the nation will ever join the EU due to weak governance.

It appears that China could gain from investing heavily in this tiny nation.

Shell Sells Nigerian Oil Blocks to Local Companies

The Nigerian joint venture capital company that is owned by Shell agreed on Friday to sell its interest in three oil production licenses to a group of local Nigerian companies. The deal shows that Shell is starting to shift its focus away from Nigeria. The facilities have been shut down since 2008 and the 30 wells in question have a production capacity of approximately 50,000 barrels of oil.

The deal is subject to the approval of the Nigerian government.

EU Won't Imitate U.S. Bank Plan

President Obama recently outlined a series of proposals that could ultimately rewrite the world financial order by limiting banks' size and trading activities by preventing banks from investing in, owning or sponsoring a hedge fund or a private equity fund. Although the EU approves and supports the President's ideas they made it clear that the EU will not be following suit as it aims to reduce risk in the sector through other means. The EU has yet to make a plan for big banks' known.