Danny Quah | For three decades now, many of the world’s most insightful observers have predicted the imminent demise of China’s system. But these same three decades have also seen China confound expectations. China’s economy turned in double-digit growth rates. China lifted 600 million people out of poverty.
Market commentators tell us that the price of Brent crude is dropping and indices like the S&P 500 and the Ibex 35 are falling. The reverse should be the case. Have we not been told that Spain has benefited from the decline in raw material prices? This cuts import prices, increases export margins, reduces pressure on wages etc. But it’s not the case. Oil prices have been tumbling for the last year, and whenever these begin start to tremble so do the stock markets.
UBS | China growth concerns and oil price weakness have undermined market sentiment and heightened risk a version in recent weeks. Given EM banks’ credit exposure to commodities/energy sector, estimated at less than 5%, there are also growing concerns over bank sector fundamentals.
The collapse of the global stockmarkets, with European bourses falling 10 percent or more over the past month, is a cry for help to the central banks to ‘do something’, namely provide more stimulus to the economy. One of these voices is Ray Dalio, founder of the world’s biggest hedge fund Bridgewater, who said that the Federal Reserve needs to start printing money again to boost markets.
Guntram B. Wolff via Caixin | One of the clear trends of 2015 was the rise of parties that radically challenge the consensus of traditional parties and their representatives. This trend is perhaps most visible in France and the United States but is also strong elsewhere. It will likely be a major force shaping European and global policies. A reflection on its causes is imperative to define the right policies for 2016. We should also ask what could it mean for China.
James Alexander via Historinhas | Where are the John Maynard Keynes’ and Milton Friedman’s when you need them? The Fed, led by Janet Yellen and Stanley Fischer, has made a huge mistake in tightening monetary policy. The other members of the FOMC are largely irrelevant noise, with the possible exception of the NY Fed’s Dudley, though all carry blame.
Which countries are poised to become the next high-growth developing markets?Until recently, when people talked about “emerging markets,” they were referring to the BRIC economies: Brazil, Russia, India and China. Undeniably, these countries have changed the face of global business over the past 20 years. Yet lately, the BRICs have been crumbling a bit, sparking many reports about their lackluster performance.
Key economic data disclosed Tuesday by Beijing seems tailored to the official mantra that matters are firmly under control. So GDP supposedly showing a 6.9% increase in 2015 only marginally trims the 7% forecast given in January last year. Quite an amazing result which is in open contradiction to the rather stern measures introduced to stave off a slowdown.
The Popular Bank of China is trying hard to protect its currency from the current sell-off. Ever since it broke away from the dollar peg switching to a trading basket reference, the currency’s depreciation has gained momentum as its off-shore value continues to deteriorate. With the aim of bridging that gap, the PBoC raised the rates in the off-shore market beyond 60% last week. On Monday it imposed a 17.5% mandatory set aside for off-shore money holdings.
Brazil industrial production have been evolving according to the world average. For the past six years, however, it “dismounted from the world horse”.