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World economy 1st September 2014

Deng Xiaoping: A great legacy posing a great dilemma for China

Three decades after admired reformist leader Deng Xiaoping launched his experimental plan of economic reforms, the new Chinese president Xi Jinping is nowadays facing the exact same challenges (and pressures) than his revered comrade. Moreover, Mr Xi’s political survival depends on his ability to earn the trust of the masses and offer them real options for progress. He will have to find a way to do so without tamping the privileges of all those wealthy entrepreneurs who benefited from Mr Deng’s capitalist reforms.

 

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World economy 27th August 2014

China’s antitrust investigation threatening 25% of car industry’s global benefits

MADRID | The Corner | China’s antitrust investigation on over 1,000 manufacturers and foreign suppliers in China (market of € 450,000 million in revenues) threatens 25% of the sector’s global benefits. In particular, German manufacturers are the most exposed (BMW, Daimler, Audi and Porsche generate 50.000 million euros and account for over 80% of demand for luxury goods). According to Morgan Stanley figures, 80% of the market has been influenced by foreign companies. In the short term Morgan Stanley analysts believe the focus of the problem will centre on imports but generalized cuts in luxury markets are also expected.

China's economy slows

World economy 24th August 2014

China as Responsible Stakeholder or Just ‘Guest’?

Via Caixin | By Miriam L. Campanella | Media outlets have published news that based on a World Bank report China’s economy will be the world’s largest in terms of purchasing parity power (PPP) by the end of 2014. Yet, China itself did not welcome the news. The World Bank included a note in its report that the country’s National Bureau of Statistics contested the methodology and rebuffed the report. The Financial Times even reported how China tried to convince World Bank analysts not to use the data. “China wanted to throw this out,” one source said.

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World economy 20th August 2014

UBS: Brazil’s GDP growth loses momentum

MADRID | The Corner | 2014 is not being a good year for LatAm. All countries in the region with the exception of Colombia have experienced much softer than anticipated growth. In Brazil, the political noise and uncertainty have impacted on the confidence and private activity in 1H201, with investments and private consumption leading the way down. UBS analysts see now Brazil’s real GDP growth at 0.6% in 2014 and 1.5% in 2015.

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World economy 20th August 2014

US residential construction recovers in July

MADRID | The Corner | After two months of decline, US construction rebounds in July at the fastest pace in eight months. As the Commerce Department reported yesterday, the number of housing starts rose 15.7% in July compared to June, reaching an annualized figure of 1.09 million units, the highest in eight months. Meanwhile, applications for building permits in the same month also advanced  8.1% to an annual rate of 1.05 million, after drops of 3.1 percent in June and 5.1 percent in May. Notably the permits to build single-family homes, a segment that accounts for three quarters of the U.S. housing market, increased in July by 0.9% to an annualized figure of 640,000, the highest since December 2013. In addition, permits for units in buildings with five units or more rose 23.6% in July to an annual rate of 382,000, representing its highest growth rate since January 2006.

CHINA

World economy 19th August 2014

Further policy easing to support China’s property downturn

MADRID | The Corner | The biggest uncertainty for China’s economy now and in 2015 is the nature and duration of the ongoing property downturn. Following a sharp drop in the beginning of 2014, Chinese property construction has shown signs of improvement in recent months as policies have been increasingly relaxed. Both have provided support for the economy and property related stocks, with the latter rallying by 17% from trough levels. However, UBS analysts expect that the property downturn will weigh more heavily on growth in Q4 and 2015.

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World economy 18th August 2014

Jackson Hole: Without inflationary pressures on the horizon

MADRID | The Corner | Central bankers are meeting this week in Jackson Hole to talk about employment and its weakness in general terms. Unlike what is happening in Europe, US and UK are seeing improvement in employment (their unemployment rates have decreased from 10% to 6.2% and from 8.4% to 6.4%, respectively) with the curiosity that they’re not coming with wage increases. In fact, last British data shows the first fall since 2009. This circumstance means less inflationary pressures, therefore Bankinter analysts think that central banks will not start to tense its monetary policy until wages begin to invigorate, something that will take some months to arrive.

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World economy 14th August 2014

Stock markets go up despite poor global macroeconomic data

MADRID | By J. J. Fdez-Figares (LINK) | European and American stock markets closed yesterday up in a session of low activity and  volatility. The good performance of Western stock markets ​​occurred despite the set of macroeconomic figures published during the day in China, Europe and the USA, which pointed again to a global slowdown in economic growth. The only explanation we can find to the good performance of stock markets yesterday is precisely that investors have interpreted that as long as the growth of these economies remain weak, the central banks will be forced to maintain its current policy of monetary expansion, which provide liquidity to the system, something that equity markets consider positive.

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World economy 13th August 2014

Georgia judges his ex-president and lifts the economy

MADRID | By Ángel Maestro | August arrived with the positive outcome that the IMF Executive Board will support the economic reform program in Georgia with 154 million Stand-By dollars. Among the economic measures, paradoxically, to reduce the dollarization in favour of the home currency and the euro, in order to accelerate its economic and political stabilization process. Concerning the second is the macro-judicial processes that will begin this Saturday against its former President Mikheil Saakashvili in relation to abuse of power charges which have driven numerous concerns by several worldwide institutions and non-governmental organizations.