Most esteemed friends, welcome in Beijing

About China’s economy

By Daniel Paquet                                                                                                   dpaquet1871@gmail.com

“Weak business investment and trade remain dominant themes in the global economic outlook.  Global growth in investment has slowed since 2012, partly as a result of uncertainty over future prospects for global demand and ongoing structural adjustments in China. (…)

Over the past decade, China’s manufacturing industry has been producing a widening range of products domestically, thus specializing less in assembling and processing imported inputs and reducing the importance of global supply chains. (…)

Growth in China is projected to slow gradually to 6.3 per cent by 2018.  Previously announced fiscal support and rapid credit expansion appear to be boosting growth in spending on infrastructure and in the housing sector.  While these developments are helping to replace some lost demand from slowing investment in mining and manufacturing industries, particularly in unprofitable state-owned enterprises. (…)

A modest decline in metal prices is expected, reflecting slower growth in both investment and production in commodity-intensive industries in China, combined with strong supply growth from previously built mines in other countries.”[1]

However, “China escaped the worst of the 2008 global financial crisis by starting a campaign of state-directed spending that created mountains of new debt.  This helped cushion the blow of the fallout around the world. (…)

The sharp rise in debt prompted one I.F.M. (e.g. the International Monetary Fund) official to warn this month of the risk of a financial ‘calamity’ emanating from China. (…)

(Altogether) ‘The risks of a financial crisis remain very low,’ said Andy Rothman, an investment strategist at Matthews Asia, based in San Francisco.  Mr. Rothman and others point to China’s tight grip on its financial system.  It controls the country’s big banks and the big companies that borrow the most.  It also limits how much money can leave its borders and keeps a firm hand on the value of its currency. (…)

What’s more, private companies, put off by the lackluster economic outlook, have been pulling back on investment.  State spending has helped keep growth rates on target so far this year, and a rebound in real estate investment has also helped, albeit at the risk of inflating a housing bubble.”[2]

In any case, “the Philippines’ acid-tongued president, Rodrigo Duterte, was to lead a major business delegation to China this week as Beijing attempted to lure into its orbit one of America’s key regional allies in a potential blow to Barack Obama ‘pivot’ to Asia. (…)

Withering statements have led some to conclude that Duterte is plotting a historic diplomatic rupture with the Philippines’ longstanding ally, from which it gained independence in 1946.  Duterte claimed in a recent speech that at some point, he would ‘break up with America,, adding that he ‘would rather go to Russia and to China’. (…)

Rather, Duterte was hoping to secure billions of dollars of much-needed investment to address a looming infrastructure crisis.  ‘He sees China as a pretty likely source of that’, said Nick Bisley, an international relations professor from Melbourne’s La Trobe University.”[3]

Several countries in the world are in a bad shape from all sides of the view, and this includes Europe.  Don’t we still remember Greece and others such as Italy, Portugal and Spain?

“Let us face facts:  the European project is in trouble.  With the growing threat of terrorism, the refugee crisis, lackluster economic growth and unemployment, the turmoil in Europe is unprecedented. (…)

Finally, transforming Europe means making a clear choice to foster growth that does not only depend on the European Central Bank’s monetary policy.  Europe must finance new projects and invest in digital and environmental innovation more that it does already.  (The author hopes that) an appropriately balanced deal with Canada is imminent.”

Member states (European Union, -Ed.) compete with large, developed and emerging nations.  A strong Europe is essential if they want to carry weight on the world stage.”[4]

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[1] Bank of Canada, Global Economy, Monetary policy Report, Ottawa, October 2016, pages 1, 2, 5 and 6

[2] Gough, Neil, As China’s economy slows :  What could happen, The New York Times, International Edition, Thursday, October 20, 2016, page 7

[3] Phillips, Tom; Holmes, Oliver, Duterte reaches out to China, The Guardian Weekly, 21.10.16, page 8

[4] Valls, Manuel, The push for Europe to redefine itself, Financial Times, Thursday 13 October 2016, page 11

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