China’s economic engagement in Africa tends to elicit controversy. Many Chinese deals are accompanied by Western headlines such as “China in Africa: Investment or Exploitation?” or “Clinton warns against ‘new colonialism’ in Africa.”
Yet in recent African public opinion polls, China scored higher in popularity among Africa populations than anywhere else in the world, according to Pew surveys.
The US dollar and equity futures responded favorably to the stronger than expected durable goods orders. The sizable upward revision in the June shipments (from 0.3% to 0.9%) underscores expectations of an upward revision to Q2 GDP when reported tomorrow.
South Korea’s economic growth has slowed significantly since the 1997 Asian financial crisis. The five-year average GDP growth rate was 7.9 percent during 1991–95, but dropped substantially to 4.5 percent for 2001–05 and then 3.8 percent in 2006–10. This slowdown closely links to that in domestic demand. After the burst of the credit card lending boom from 1999–2002, growth in domestic demand has been close to zero and has even dropped into the negative.
China appears to be flailing. Its stock market stabilization efforts have failed miserably. It looks as if it has botched another attempt to let market forces have greater sway over the yuan’s exchange rate yet.
In recent months, negative predictions for the Chinese economy filled the news, and less than stellar performance that seemed to prove those predictions correct. Many analysts had predicted that China might enter into an economic recession echoing the one that occurred in much of the world in 2008, but notably had a much less significant effect on China. Given China has the second largest economy in the world, such predictions have dire ramifications for the rest of the world.
In the last decade, China’s serious gender imbalance has made headlines: millions of Chinese men are doomed to bachelorhood due to a shortage of women, with awful social consequences. The conventional wisdom is that this skewing — a sex ratio at birth far higher than the natural ratio of 105 males to 100 females — is caused simply and solely by China’s one-child policy.
When the global financial crisis swept across the world in 2008, it was widely hoped that the external demand shock would affect India as badly as China. After all, exports of goods and services accounted for about 40 percent of Chinese GDP, and domestic consumption for around 50 percent, while India consumed over two thirds of its GDP and exported only around 20 percent. As things turned out, while both economies initially had a relatively soft landing, Indian growth has dipped far more sharply than that of China.
Why?
It is a bitter start of the week for EM. It is hard to imagine either stabilization or meaningful differentiation in EM until asset prices in major markets find a bottom. In addition, the second leg down in commodity prices will keep fundamental pressure elevated for the exporters. Russia, Malaysia, Mexico, South Africa, and Brazil will be the barometers for this. Some have noted the break above the USD/CNY 6.40 level as meaningful, but we do not read too much into it. The Chinese yuan is doing what officials said it would do: there is more volatility but no large moves.
Reading the latest Chinese growth projections to 2050 brings to mind Karl Marx’s aphorism that history repeats itself first as tragedy, second as farce. One of the co-authors, a Yale economics professor, told the Financial Times the ‘main point of our findings is that, contrary to common misconceptions, productivity growth under Mao, particularly in the non-agricultural sector, was actually pretty good’. But this is no argument to return to Mao-era policies, which would be a tragedy for the Chinese economy.
Greek elections and Fed policy loom large over international markets, but the world awaits with anticipation as Chinese officials try to mitigate sluggish growth, according to Reuters. Analysts expect banking authorities to ease reserve requirements to invigorate lending throughout the nation. Overall, the government aims to achieve a growth rate of 7.0 percent for 2015.
