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Last Updated: Thursday, 27 December 2007, 08:26 GMT
The year in business: 2007
By Martin Webber
Business editor, BBC World Service

A year ago, US businesses were protesting loudly that they were being over-regulated.

Foreclosures are spreading to areas like Los Angeles, depressing prices
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Form-filling had certainly mushroomed in the wake of the dotcom scandals and the recent accounting frauds at Enron and Worldcom.

The complaint was that this meant lots of international business was fleeing Wall Street, much of it diverting to London instead.

And yet, 12 months on and there was another wave of financial regulation, this time in the housing market.

The threat of millions of Americans being thrown out of their homes because they couldn't afford to pay their mortgage debts forced President George W Bush to take decisive action.

Mortgage woes

Unveiling Federal Reserve mortgage aid plans in December, the president said the scheme would offer complete, accurate and understandable information for citizens looking to borrow money to buy a home.

Northern Rock branch
Ms Fanfan was just one of many thousands who lost their homes in what has become known as the sub-prime crisis

You might have thought the world's biggest economy would have got that sorted a long time ago, but clearly not, as Merke Fanfan, a Haitian now living in Boston, described.

Her mortgage repayments were perfectly affordable for the first two years, but then - to her surprise - the interest rate on her loan shot up.

"The mortgage kept rising, it started at $1,700 but last year - 2006 - the mortgage was almost $3,000 and I ended up in foreclosure," Ms Fanfan told World Business Report.

"I feel that I trusted the people that I was working with. As a consumer, I'm not real estate savvy or mortgage savvy. You know what you are signing, but you don't really know what you are signing."

Credit crunch

Ms Fanfan was just one of many thousands who lost their homes in what has become known as the sub-prime crisis, as those worst affected in America were mainly low income citizens with a poor record of paying back their debts.

US housing construction

But could this really have global implications?

The answer was yes.

Most of the sub-prime lending had been done by companies that sold on their loans to other banks.

These financial institutions viewed the risks as fixed and failed to see the risks had in fact been soaring, as lending was gradually extended to people with less chance of being able to keep up their repayments.

The losses mounted from a few billion dollars to tens of billion dollars. US banks, European banks, Asian banks were all affected.

And it snowballed from there.

Rocky times

Banks simply didn't trust each other - they didn't know who had the worst problems.

So interest rates for big banks went up sharply, and that was very bad news for one British Bank - Northern Rock.

Getting cash cheaply from other banks was vital to its strategy, and when that cash dried up and it emerged that the Bank of England was coming to its rescue, savers queued outside its branches to withdraw their money while they could.

It caused the first run on a bank in Britain for more than a century, and people up and down Britain joined in.

Under control

At one point, fears were high of a big knock-on impact to the broader economy outside the banks.

Cheap energy in China means domestic coal, which is dirty
Professor Matthew England, a climate scientist from the University of New South Wales

Americans felt poorer as their house prices fell, while companies globally found it tougher to raise funds for expansion projects.

But central banks around the world intervened and made billions of dollars available to the big banks to keep borrowing costs from rising too sharply.

The crisis stayed under control, and while US economic growth is currently weakening, many economists expect the US to avoid a recession.

Burberry blues

There was no sign of anything like a recession in China. The country's economy continued to boom, taking on still further the role of manufacturing centre of the world.

But as factories opened in China, at the same time they were shutting down in many parts of the US and western Europe

While rich countries have generally ceased manufacturing cheap goods, more upmarket brands have tended to stay.

The quality clothing maker Burberry was still making polo shirts in a factory at Treorchy in South Wales, until it decided to close the factory, promoting this angry response from the firm's 300 workers.

Unions leaders admitted that the cost of making a shirt in Wales was more than twice that in China.

But what the unions also pointed out was that the production cost in Wales of around 11 a shirt was still well below the 80 a shirt that customers pay in the shops.

Star support

A campaign to keep the Welsh factory open won support from many famous actors and the Welsh-born singer Tom Jones.

The march of globalisation couldn't be stopped, though.

Burberry refused to back down and it was left to a Welsh male voice choir to accompany the workers out the factory on their final shift.

More than two thirds of Burberry's manufacturing is still in Europe, but the shift to cheaper locations seems unstoppable.

But what about the effect of such a shift on the environment?

Despite apparently increasing 'green' awareness over the past year, the emissions impact still seems to have no influence on the way businesses shift work around the planet.

Dirty energy

China now seems to be on the point of overtaking the US as the world's number one producer of greenhouse gasses, such as CO2, according to the International Energy Agency (IEA), which advises wealthy countries on energy policy.

"China is a developing country... and for economic growth they need cheap energy," the IEA's chief economist Fatih Birol told World Business Report. "Cheap energy in China means domestic coal, which is dirty. It means a lot of CO2 emissions."

Professor Matthew England, a climate scientist from the University of New South Wales, was among those who travelled to the Bali summit of world politicians in December to deliver a petition to try to stun policymakers into action.

"We have to have a radical change to the way we power this planet," he said during the summit. "We've got to start reducing greenhouse gas emissions as soon as we possibly can."

The Bali meeting was meant to start a process that comes up with a successor to the Kyoto treaty, which promised - but hasn't delivered - modest cuts in emissions.

So far, there seems to be little sign of any desire of the world's rich to enjoy themselves in ways that use less energy.

Shanghai frenzy

Of course, when resources run short, then the prices goes up.

Metals and many foods did see their prices rise sharply in the past year.

But there was nothing to rival the soaring value of shares on the Shanghai stock market.

A frenzy of buying saw the market treble in value over the past year. Every new share issue was snapped up.

On the first day of trading on the exchange for China's dominant oil producer, PetroChina, the company saw its value soar to 60 times its earnings.

Many African countries also benefited from the high global commodity prices.

World Business Report spoke to one successful businessman, Aleeko Dangote, who was described as the richest man in Africa, and who has made his fortune in sugar, cement, rice, pasta, textiles and salt, as well as oil and gas.

A well connected man and major donor to Nigeria's ruling party during presidential elections earlier in the year, Mr Dangote told us: "The country needs to be doing well. If the country was to be like Zimbabwe for example, then I will become a poor person."

Listen to Martin Webber's 2007 Review

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