Iris Mir | China starts a new round of economic experimentation. Shanghai is set to become the new engine of growth with a China’s first Free Trade Zone (FTZ). The goal is to attract foreign investment by testing new deregulation rules that should give foreign companies greater flexibility. But urgent reforms in other areas are a must in order to transform the rise of the income of Chinese households into real purchasing power.
Iris Mir | By mid-June the National Audit Office of China released a report unexpectedly detailing the debts of 36 local governments. It unveiled the chilling figure of 3.3 trillion dollar in debt, by the end of 2012. A 13% higher than in 2010. Furthermore, the lack of stimulus investment plans is fuelling scepticism among those who expected the Asian dragon to keep the world economy afloat. Mostly because the priority for China now is to reorient its model of growth with ambitious programs like the new Co2 emissions exchange.
WASHINGTON | By Pablo Pardo | There is a silver line: Spain is reducing the fiscal consolidation’s impact on its economic growth.
MADRID | By JP Marín Arrese | As we move into troubled waters following the FED intention to taper off its massive asset buying scheme, the ECB is bound to take bold steps to protect both the European economies and the common currency. Otherwise we may run into severe turbulences in the coming months.
China turns into a urban nation. A transformation that entails a dramatic achievement and a challenge without precedents in the world. As cities become better places to live they become more expensive too, to the extent that people can’t afford the luxury of inhabiting these mega-cities. Without a fairer model, which fosters job creation and an equal access to resources, urbanization risks undermining the country’s transition towards domestic consumption.
MADRID | By Javier Flores, analyst at Asinver | The question, of course, is how long it will take for the curve to head downwards. No expansion lasts for ever.
BEIJING | In his last speech the outgoing Prime Minister, Wen Jiabao, acknowledged the social challenges China is dangerously facing. The new leadership will have to deal with local governments and State Owned Enterprises ready to defend their current status quo and likely to be sceptical about any form of reform.
MADRID | Dennis Lockhart, president of the Atlanta Federal Reserve: “Why couldn’t we grow by a higher rate? Because people still are in the middle of a deleveraging process, which makes it near impossible that consumption takes off again.”
China’s economic miracle was possible thanks to three decades of cheap manufacturing and exports. Thousands of workers left their villages to become the cheap labour force of China’s southern cities. Now this is a thing of the past.
Public spending can be cut down particularly when there is growth and economy expands. One has only to look at the US’ GDP to learn a powerful lesson: austerity untimely implemented does more harm than good.