Author Archives: GovWorldMag

Budget reflections

As we had read in the newspapers, the Office of Budget Responsibility decided to downgrade their forecasts for productivity, which led to a reduction in the growth forecasts. These growth forecasts have been up, down, up and now down a bit over the last two years as various assumptions have been changed. The latest version shows growth at 1.4% in 2018 and at 1.3% in 2019, down from 1.6% and 1.7% in the Spring forecast.  These forecasts relate mainly to the pre Brexit period, with growth rising again in 2021 and 2022 after exit.

Despite this revision the government is still on track to start to cut debt as a proportion of GDP from next year onwards. Public sector borrowing is now estimated at £49.9bn this year compared with the £58.3bn in the Spring forecast, and to fall in  cash terms for every year over the next five years. Revenues have been more buoyant than the forecasters expected.

The OBR may be right to reduce its productivity figure, as all major economies have experienced slower productivity growth than before the banking  crash of 2009. The UK has been particularly successful at creating many more jobs.  This will tend to reduce the average rate of productivity growth.  Productivity is measured by comparing the value of the output sold with the numbers of employees creating it. As an economy increases the share of certain services it will tend to slow the growth of productivity. Faster productivity growth with higher productivity numbers is generated by large investments in oil extraction, chemical plants, automated engineering works and the like where the amount of output per employee is very high reflecting the large amounts of capital equipment put in.

It does seem that the global number crunchers are having difficulty capturing the value and the efficiency of the new digital revolution. The big digital service providers are cutting prices of traditional activities and supplying substantial service free to the individual user. Is this fully captured in the way they calculate the figures?

Meanwhile the official forecasters have struggled by taking too pessimistic a view of Brexit. Their idea that investment and confidence would be hit badly affected their short term forecasts after the vote. Some of this has now been adjusted in the latest forecasts which assume business investment will resume growth from this year onwards after a pause in 2016. They now expect employment to rise each year a little as the economy continues to create extra jobs. They expect good growth in UK exports this year and next, with very little  growth in trade in 2020 and 2021.

Overall the forecasts look more sensible than the pessimistic ones in the summer of 2016. There could be more surprises on the upside, as there were today on the deficit this year and the tax revenues.

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New technology adopted to protect fireworks workers

Concerns about explosions and health issues have resulted in improved production procedures and stricter supervision.

People take photos at an international firework festival which is held every two years in Liuyang, Hunan province. The city is widely regarded as China's fireworks capital. [Photo by Hou Liqiang/China Daily]

People take photos at an international firework festival which is held every two years in Liuyang, Hunan province. The city is widely regarded as China’s fireworks capital. [Photo by Hou Liqiang/China Daily] 

As the government continues to tighten controls on the manufacture of fireworks, companies in the industry are also making efforts to further automate the production process and reduce the risks to employees and the public.

The moves follow a number of high-profile accidents, the latest of which occurred on Sept 22, when seven people – five production line workers, a doorkeeper and a manager – were killed in an explosion at a factory owned by Fenglin Fireworks Export in Pingxiang, Jiangxi province.

There are 2,800 fireworks factories nationwide, according to the China Fireworks and Firecrackers Association. Wu Zhengli, the association’s secretary-general, said the industry’s annual output value is between 60 billion and 80 billion yuan ($9 billion and $12 billion). Although domestic sales have fallen by 15 to 30 percent – mainly as a result of stricter regulations governing firework use in urban areas – the export value is relevantly stable at about 5 billion yuan a year.

The industry is one of the oldest in China, and dates back more than 1,000 years. While gunpowder, one of the “Four Great Inventions of Ancient China”, has been hailed as making a significant contribution to civilization, the use of fireworks has been increasingly criticized because of the risks inherent in production and use, and pollution concerns. Zhong Ziqi, the association’s director, said about 1,000 cities have banned or restricted the use of fireworks in recent years.

Although manufacturers are required to obtain new safe-production licenses every three years, industry insiders claim they are becoming increasingly difficult to acquire as a result of more-stringent supervision.

Liu Yan, general manager of Xinghe Fireworks Manufacturing in Pingxiang – which exports products worth more than 70 million yuan a year to 10 countries – said that in the past national safety standards were not enforced rigorously because local governments were committed to economic development. Now, the requirements are being enforced more strictly, and companies commonly invest more than 40 percent of their profits in security measures, she added.

There are no official statistics about the number of fireworks factories that have failed to renew, or have been refused, licenses, but many have already closed in Liuyang, Hunan province, which is widely regarded as China’s fireworks capital because of the high production volume.

Last year, there were about 900 fireworks factories in the city, but the number should fall to 560 by the end of the year, as stipulated by the city’s work safety authority. By Oct 18, 215 factories had either closed or had scaled back production.

Overcoming doubts

In 2009, Liuyang Zhongzhou Fireworks was one of the first manufacturers to install an automatic production line, despite doubts among industry insiders and most of the company’s 500 shareholders.

The line was installed after three years’ of research and development, but it was less efficient than expected, and the company had to spend more than 10 million yuan a year to raise output, said Li Changkai, the president.

“I was the only person among the 500 shareholders to back further investment in the line. The others thought that R & D was a bottomless pit that would never yield returns,” he said, adding that he was determined to retain the automatic line because it broke the production process down into individual stages and protected the employees.

“Our workers’ safety can only be guaranteed by the use of machines that separate them from the gunpowder,” he said.

In 2015, Li saw a light at the end of the tunnel when a third-generation production line was put into operation. The line is capable of producing 2 million boxes of fireworks a year, with an annual production value of 200 million yuan. Moreover, only 11 employees are involved in the process, compared with 300 before. The less contact people have with gunpowder the lower the risk of accidents, the company said.

Liuyang Zhongzhou now operates 10 automatic lines in Liuyang and nearby Liling city, and five more are scheduled to come into operation early next year. However, at 26.8 million yuan per line, few small producers can afford the technology, so Li plans to rent his lines to competitors.

“We will charge companies to rent the lines, and also ask for a percentage of the profits, so we expect to recover the cost of one line in about two years,” he said.

“The current line removes the basic safety risks but is not as ‘intelligent’ as I would wish,” he said, noting that the line is unable to produce a wide variety of fireworks. “I’m not satisfied with it, so we will invest more in R& D.”

This year, the company has spent 30 percent of its profits on upgrading the line. It has also invested 50 million yuan on construction of a 6,000-square-meter R& D center in Liuyang, and will spend more to bring in fresh talent, he added.

According to the Hunan Work Safety Authority, Liuyang Huaguan Fireworks also put an automatic line into operation this year, after investing 110 million yuan on five years of R& D.

For safety reasons, the line contains just 23 kilograms of gunpowder, spread across 18 separate machines and transport units. No labor is needed if the entire line is operating as planned. The authority said pollution concerns have been addressed by replacing the yellow mud that was traditionally used to block the end of firework tubes, but can contaminate water sources, with a new material that is environmentally friendly and can be recycled to make paper.

Meanwhile, Hunan Kefu Fireworks, in Liling, will soon begin trial operations of an automatic production line.

“There are three main procedures in firecracker production – inserting lead linings, filling the tube with gunpowder, and blocking the end of the tube, which are all dangerous exercises”, Pan Jiangping, Kefu’s general manager, said, adding that the company has invested 22 million yuan in R & D and the construction of a building to accommodate the line.

“The line will automate these procedures and make production safer. Traditional production techniques mean gunpowder is often exposed to the air, which poses a safety risk. Instead, we will use a closed system to prevent major leaks. Any gunpowder that does leak will quickly be collected to prevent dust from threatening the workers’ health.”

Li, of Liuyang Zhongzhou Fireworks, has seen many changes during the 20 years he has spent in the industry, and he is adamant that safety is always the main priority.

“Fireworks are for entertainment and should bring people happiness. Accidents were commonplace when they were traditionally made by hand, and resulted in many injuries. I would rather not continue if we can’t guarantee our workers’ safety,” he said.

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Instant hotpot raises safety concerns

Instant, self-heating hotpot has become the latest food craze in China. However, it’s also raising safety concerns at the same time, reports the Workers’ Daily.

An advertisement for instant, self-heating hotpot [Screenshot: tmall.com]

An advertisement for instant, self-heating hotpot [Screenshot: tmall.com] 

Priced between 20 to 50 yuan, the hotpot set generally contains a heat pack which can be activated by room-temperature water. It can then generate enough heat to steam a small bowl of ingredients for 10 to 20 minutes.

However, researchers with Southwest University say the heat pack remains a major safety concern for consumers.

“A heat pack usually contains calcium lime. When this is combined with water, the temperature in the hotpot’s plastic container can reach up to 90 degrees within 10 seconds. This can deform the container, which runs the risk of hurting people, and may even lead to an explosion,” said researchers at the school.

Meanwhile, the ingredients in the hotpot pack, which commonly contains meat, vegetables and a base soup, are being questioned about whether they comply with China’s food-safety standards and requirements.

The report in the Workers’ Daily also claims that the self-heating hotpot has not obtained a legal production license from Chinese food authorities.

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