There is a very interesting graph on page 14 of the World Bank’s December 2008 Quarterly Update on China. I am not smart enough to figure out how to reproduce the graph but I will describe it. It shows private consumption and wage share in China as a function of China’s GDP, from 1993 to …
Read More…Archive for November, 2008
Will the interest rate cut by the PBoC make things better, or worse?
Last night the PBoC surprised the market with its biggest rate cut since 1997. Lending rates for one year or more were cut by 108 bps, while the six month lending rate was cut by 99 bps. Deposit rates were also cut, but with smaller cuts in short term rates (36 bps for demand deposits) …
Read More…More downward revisions
The Citibank rescue Monday caused markets around the world to surge, but China was buying none of it. Yesterday the SSE Composite dropped 3.7% and, after a morning rally, it declined a further 0.4% today to close at 1889. The economic news continues to be bad and it is hard to find any enthusiasm anywhere, …
Read More…Why is the balance of payments constraint such a mystery?
Fareed Zakaria usually writes very interesting pieces on international policy issues, but it seems to me that there is so much mystery about how the global balance of payments works that he, like so many others, makes simplifying assumptions that don’t take the balance into account, and for that reason just don’t make sense. In …
Read More…Rising unemployment increases the pressure for misguided trade policies
Too much travel and a longish writing commitment have kept me from posting on my blog recently, but I plan to return to it over the weekend. I did want to mention a couple of things quickly today however. The first is that the unemployment situation here has gotten grim enough that the government is …
Read More…Would a trade war help solve the problem of excess capacity?
On Friday Chinese stock markets capped one of the best weeks in an awfully long time, with the SSE Composite closing at 1986, up 3.1% for the day and 13.7% for the week. Although a lot of local analysts have been saying that the rally is long overdue and represents confirmation that we have bottomed …
Read More…Can Smoot-Hawley return in a wholly different guise?
Chinese stock markets have bucked the trend in the rest of the world by posting a decent day yesterday and a great day today. Yesterday the SSE Composite rose 0.8%, and today it rose another 3.7% to close at 1928. I don’t think the rally was caused by good economic news – today’s data release …
Read More…The RMB 4 trillion fiscal engine seems to be losing steam
On Sunday I suggested that the newly-announced RMB 4 trillion fiscal package would cause markets to surge, but that the rally would not last very long as analysts began examining the numbers more closely. In fact the duration of the rally was even shorter than I expected. On Monday the markets did indeed surge, with …
Read More…Can China adjust to the US adjustment?
After dropping as low as 1679 on Tuesday the Chinese stock markets managed nonetheless managed to put in a decent week, with the SSE Composite closing the week at 1748, up 1.1% for the week, helped by Tuesday’s Obama-inspired global rally. A lot of people have asked me what I think the bottom of the …
Read More…Congratulations Mr. Obama, but its tough out there
I always seem to be traveling when exciting things are happening. I just got back this morning from four days in Paris, where I had to go for our annual Board of Directors meeting (and took the opportunity in addition to meet a number of investors and government officials), and so I was in a …
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