Downshifting is always painful, but politicians often make it more painful—and ultimately more destabilising—than it needs to be. That was certainly the case in the U.S. in the 1970s, and Chinese leaders would do well to learn from America’s experience.
Chinese Premier Li Keqiang‘s recently published article on China’s reform drive and international cooperation shows the country’s pragmatism and determination, and charts a new and unprecedented blueprint that will also benefit world economic growth. Li’s article titled “China’s economic blueprint”, which was published in the Economist magazine on Nov. 2, depicts the direction and key points of China’s reforms as well as prospects and paths of international cooperation.
At HSBC’s global investment seminar in New York last week, some of the top strategists from Europe’s largest bank laid out their outlook for global markets and economies.
Many strategists are not expecting the current recovery from the financial crisis to be as impressive as what has come before, while some investors aren’t expecting double-digit returns in the near term.
Additionally, strategists are losing faith that the Federal Reserve will actually raise interest rates anytime soon.
Read Here – Business Insider
Saudi Arabia’s cash reserves are in free-fall and the country could have only five years of financial assets remaining due in large part to the fall in oil prices, according to a report by the International Monetary Fund (IMF).
Read Here – The Independent
With China set to announce its third-quarter gross domestic product report on Monday, skepticism over its economic data is arising anew. Recall that Bill Gross has described China as “the mystery meat of emerging-market countries.” Premier Li Keqiang, before taking that post, said he didn’t rely on official statistics. He preferred things like rail freight and electricity use to gauge activity. So is China about to puff up its economic report card once more? Quite the contrary, according to one of the world’s foremost emerging market investors, Mark Mobius.
This weekend’s annual meetings of the International Monetary Fund and the World Bank, which brought together finance ministers and central bank governors from almost 200 countries, seem to have yielded no material changes in policy formulation at either the national or multilateral levels, and offered little to alter views on global economic prospects.
Beijing has yet to put together a credible response as to what should be done with zombie companies, the huge swath of unprofitable state-owned enterprises surviving on the good will of the Chinese government. Until it does, private companies in the world’s second-largest economy will continue to fight an uphill battle for growth, and China’s reform efforts will share a key characteristic with the mythical creature in question: not dead, but not really alive.
China has many levers to pull economically, and stagnation and lower potential growth are relative. But the global hunt for economic growth by central banks will be a persistent source of volatility in financial markets. Without the ability to jump start their economies using traditional monetary policies, central banks will use unconventional policies more often in attempts to remain competitive globally and search for increasingly elusive growth spurts. Larry Summers may have been more correct than he knew.
For Xi, even the slightest perception of a stumble is politically risky. In the two-and-a-half years since he came to power, his anti-corruption drive has turned many of his former comrades into bitter enemies. The bureaucracy, frozen in fear and outraged about the loss of many of its privileges, including entitlements to bribes, may well be cheering the apparent comeuppance of China’s new strongman. Xi’s rivals, cowed by his sheer display of power and momentum not too long ago, may smell blood now.
If China is indeed making the transition it has long said it wishes to make, it would look like what we are now seeing. Both the IMF and the World Bank have in recent months pointed to compelling evidence that the transition is well under way, and it’s one of which they heartily approve. It’s remarkable that last year consumption growth in China contributed more to GDP growth than did the growth of investment. Remarkable, too, that half of the overall growth of output was contributed by services rather than by heavy industry.
