I want to start this newsletter with a story that may be fairly illustrative of one of the problems within the Chinese economy that I worry about. There was an article in last Sunday’s edition of the South China Morning Post about a real estate project in Guangdong. (WC Fields’ was supposed to have once [...]
Small companies feel the pain in China
Jun 28th, 2011
Much of last week’s newsletter was on the data that was released on inflation, new loans, investment, etc. One thing worth noting in the current environment is that small and medium enterprises (SMEs) are hurting, and last week’s minimum reserve hike – which came out the same day as the CPI number – will undoubtedly [...]
How to become virtuous and save more
Jun 14th, 2011
For this week’s blog entry I want to go a little abstract in order to suggest how different countries that participate in the global imbalances are going to adjust. The debate over the root causes of global imbalances is as fierce and as confused as ever. The confusion isn’t helped by the vast army of [...]
Trade and the RMB
May 31st, 2011
Most of last week’s newsletter was dedicated to a discussion on Chinese debt, specifically on how we should think about the Chinese debt structure and on when would we know how much debt is too much debt. Every earlier example of the investment-driven growth model that China follows ran into the problem of an unsustainable [...]
Looking for debt
May 25th, 2011
Quite a lot of data came in last week as I was recovering from the jet lag generated by last week’s trip to the US, and for good measure, the PBoC then raised minimum reserve requirements Thursday evening. I discuss the numbers extensively in my newsletter, and of course there has been a lot of [...]
Rebalancing through wage increases
May 15th, 2011
Is China currently rebalancing? The currency has been appreciating, the PBoC has hiked interest rates four times, and wages have been surging. Because of all of this I am often asked if China has finally begun the long-waited rebalancing process and whether we have yet seen an improvement in the underlying economy caused by a [...]
The week before last on Thursday the Financial Times published an OpEd piece I wrote arguing that Washington should take the lead in getting the world to abandon the dollar as the dominant reserve currency. My basic argument is that every twenty to thirty years – whenever, it seems, that American current account deficits surge [...]
Chinese recycling and US interest rates
Apr 15th, 2011
I mentioned in last week’s blog entry that during my trips to New York, Washington and Hangzhou in the past two weeks one of the common themes was concern about rising debt levels and weaknesses in the banking sector. Another theme – one which I want to discuss in this entry – was the possible [...]
Reforming the banks
Apr 7th, 2011
I just got back from a very interesting but hectic week in New York and Washington, followed by two days at a conference in Hangzhou. During my meetings I noticed that much of the discussion, and many of the questions I was asked by both government officials and investors, focused on debt levels and reforms [...]
Is loan growth in China slowing?
Mar 24th, 2011
Most of this week’s very long newsletter focused on the NPC meeting in Beijing, the proposals to boost consumption (which I think will greatly disappoint), and the release of data by the National Bureau of statistics. Last week, for example, new lending numbers were released, and if it hadn’t been for rumors all the previous [...]
The dollar, the RMB and the euro?
Mar 12th, 2011
Barry Eichengreen had a very interesting piece in last week’s Wall Street Journal. In it he argues that we are approaching the end of the period in which the US dollar is the world’s dominant reserve currency, and suggests what that might mean for the world. Here is what he says: The single most astonishing [...]
Zaiteku and China’s January inflation
Feb 24th, 2011
A large part of my newsletter earlier this week discussed emergent scandals in the railway industry and their implications for the overinvestment debate, and this was even before the Alibaba scandals broke, but I think a lot more interest this week surrounded the inflation numbers. Last week the National Bureau of Statistics released inflation data [...]
Chinese stock markets and European politics
Feb 10th, 2011
Because of the lunar New Year festivities when I wrote my newsletter little had happened in China besides the 25 bp interest rate hike on Tuesday, not counting of course the never-ending stream of fireworks and the several really great jaio zi dinners I have managed to snag from my students and their families. I [...]
Currency manipulation
Feb 4th, 2011
On Friday the US Treasury released its presumably semi-annual (it was due last October) report to Congress on currency issues, and in it refrained from calling any of the countries under review “currency manipulators.” Today’s People’s Daily had this to say : Major trading partners of the United States, including China, did not manipulate their currencies [...]
How big is Chinese GDP?
Jan 29th, 2011
Most of this week’s newsletter was about the release last week of China’s fourth quarter GDP growth numbers by the National Bureau of Statistics (NBS). You can find the full NBS report on their website, but here is the key paragraph: According to preliminary estimation, the gross domestic product (GDP) for the year 2010 was 39,798.3 [...]
The real cost of Chinese NPLs
Jan 21st, 2011
Once again I am starting to hear investors tell me that they have been advised by bank analysts not to worry too much about the impact of a banking crisis in China. According to this argument, China has developed a very efficient and low-cost way to address banking crises, and the proof is that China’s [...]
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