When the 18th Central Committee of the Chinese Communist Party (CCP) decided to abolish the one-child policy in October 2015 it made headlines throughout the world. However, while the abolition of the policy is the result of the Chinese government’s newfound concern over low fertility, the low birth rate is only one of several major demographic challenges facing China.
Retail sales enjoyed strong end-of-year gains, with e-commerce growing at a rapid rate. In total, retail sales in brick and mortar stores rose 3.1 percent year-over-year in December, according to a new study by the National Retail Federation.
Last year was a challenging year for South Korea’s democracy. Since the inauguration of the Park Geun-hye government in 2013, there have been a number of incidents that raise serious questions about the soundness and maturity of South Korea’s democracy. These range from the interference of the National Intelligence Services in the 2012 presidential election to the government’s harsh crackdown on an anti-government rally in November 2015.
These days, political death in China comes in two moves. The first is when the dreaded Central Discipline and Inspection Commission (CDIC) announce that you are under investigation. After that, you live on a sort of life-support machine until the final blade falls with your expulsion from the Communist Party. Then there is no turning back.
The sudden, sharp fall of Chinese stock prices twice in 2015 and again this month does not necessarily herald a further slowdown of GDP growth. However, investor confidence, the bedrock of a healthy economy, has been shaken both in China and throughout the world.
As Chinese leaders struggle to implement market-based reforms, a severe economic crisis that causes social disruption cannot be completely ruled out. In such a case, what might happen?
EM ended last week on a sour note. The most important factor for global risk appetite has become China, with the Fed tightening cycle now on the back burner. Our base case remains that China muddles through, but policymakers there need to communicate better with the markets. The PBOC fix and Chinese equity market performance will likely be the biggest drivers for global markets this week.
Commodity prices continue to slide, with oil and copper making new cycle lows last week and adding to the gloom.
Chinese officials predict economic turmoil for the global economy. State Councillor Yang Jiechi told G-20 representatives in Beijing that recent volatility and “constant changes and intense transformations” will lead to unprecedented challenges to the world. “It is not possible to completely discard the possibility that an economic crisis could once again take place, and the problem should not be neglected,” he said in the meeting, adding “preventing or reducing negative effects from countries’ domestic policy measures is a pressing task."
The US stock market and the oil market appear joined at the hip. The Great Graphic here, created on Bloomberg, shows the correlation of the two markets. It is near 0.77, which is the highest since September 2013.
The correlation was conducted on the level of the S&P 500 and the level of the front-month light sweet crude oil futures contract. It tells us that the two markets have been moving in the same direction nearly eight of ten sessions over the past 60 sessions.
China’s southern province, Guangdong, is emerging as a globally important innovation zone and consumer market. It moves into the future as it builds a post-industrial society.
The forces that once boosted Guangdong’s dramatic economic boom – industrialization, booming world trade, cheap labor and low-cost manufacturing – are fading. With the slowest growth pace in 25 years, economic anxiety is spreading. That standard narrative is part of the story, but not the full story.
1) The Hong Kong dollar posted its biggest two-day decline since 1992, 2) Bank Indonesia restarted its easing cycle, cutting rates for the first time since February 2015, 3) Poland’s current Monetary Policy Council (RPP) held its last policy meeting, 4) Poland’s president proposed a draft bill on FX loan conversion
