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[Premium] India will be worse than China

Edward Harrison — Tue, 22 May 2012 18:39:08 +0000

When I listed my Ten Surprises for 2012 in January I predicted that China would have a hard landing, defined as quarterly growth below 5% annualised by the end of this year. But I also said that India would be worse than China. And it is this combination that makes me more concerned about the global growth slowdown in emerging markets than the crisis in Europe. This is a big, big story but no one is talking about it because Europe is sucking up all of the air

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[Premium] Daily commentary: More Chinese stimulus in the works

Edward Harrison — Thu, 17 May 2012 11:54:42 +0000

Yesterday I wrote about Chinese trade growth plummeting. This is having a negative impact on economic growth. The Chinese authorities get that. And so they have decided to boost demand

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[Premium] Amid plummeting trade growth, Chinese productivity trends are macro bearish

Edward Harrison — Wed, 16 May 2012 17:00:00 +0000

In recent months, we have seen a precipitous drop in Chinese trade growth. This comes from both the export and the import side. What's happening? A large part of it is wages. As I indicated two years ago in a post on the Lewis Turning Point, China has already sucked a large portion of the labour out of its countryside villages. And that has buoyed wage growth. However, while the external account is deteriorating, import growth is shrinking along with export growth. So, it is not that the Chinese are buying more stuff from abroad and foreigners are buying less in China. It's that demand is slowing globally, even in China. Here's the problem domestically then: malinvestment and financial repression. This article explains why

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Japan’s fuel imports driving trade deficit to record

Sober Look — Thu, 26 Apr 2012 00:17:28 +0000

As predicted earlier this year, Japan continues to struggle with its energy needs. The chart below shows the recent trend in Japan's imports of residual fuel oil. These fuel imports are quickly translating into a rising trade deficit

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Argentina Fundamentals Still Deteriorating

Win Thin — Mon, 23 Apr 2012 18:20:40 +0000

A look at the fundamentals shows why Fernandez is engaging in such visible theatrics, which also includes recent vitriol regarding the Falkland Islands. Simply put, we think economic stresses are intensifying. How deep the stresses will get is yet to be determined

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Japan to Report Another Trade Deficit

Marc Chandler — Wed, 21 Mar 2012 18:27:47 +0000

Exports are still falling on a year-over-year basis, but at a slower pace. Imports are still rising, but here too the pace is slowing. The swing into trade deficit for Japan happened from both sides. Exports were squeezed by the strengthening of the yen and weaker foreign demand. Imports were bolstered by energy imports as its reliance has dramatically risen since last year's tragedy. The key driver for the current account is not the trade balance, but the investment income. This consists of items like dividends, coupon payments received, licensing fees, and royalties. It is fairly stable. Over the past six months, Japan has received an average of JPY1.11 trillion a month. The monthly average over the past year is JPY1.17 trillion

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The Japan debt disaster and China’s (non)rebalancing

Michael Pettis — Tue, 20 Mar 2012 17:21:59 +0000

In this issue of the newsletter I want to sketch out a scenario in which rather than analyze policy announcements or make predictions I try to lay out what are the various possible paths open to China. The scenario concerns trade. China’s current account surplus has declined sharply from its peak of roughly 10% of GDP in the 2007-2008 period to probably just under 4% of GDP last year. Over the next two years the forecast is, depending on who you talk to, either that it will rise significantly, or that it will decline to zero and perhaps even run into deficit. The Ministry of Commerce has argued the latter and the World Bank the former

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When will China emerge from the global crisis?

Michael Pettis — Wed, 22 Feb 2012 15:00:00 +0000

In 2008 and 2009 I argued that the crisis we were undergoing would affect every major economy in the world, but not necessarily at the same pace. I said that China would be the last major economy to emerge from the crisis. Why? Because the huge increase in investment it engineered to postpone the domestic impact of the global crisis exacerbated the imbalances within the economy and increased its already-excessive reliance on debt and investment to generate growth

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Roach Sees ‘Relatively Contained’ Recession in Europe

Edward Harrison — Fri, 13 Jan 2012 03:00:14 +0000

Stephen Roach told Bloomberg television earlier today that he does not expect the recession in Europe to be severe. Therefore, he believes the impact on other economies, particularly in Asia that depends on Europe for external demand for exports, will be limited. Video below

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If no trade reversal now, then when?

Michael Pettis — Mon, 09 Jan 2012 13:00:00 +0000

The best resolution, and the one Keynes urged without success on the US in the 1920s and 1930s, is that Germany take steps to reverse its trade surplus. It could boost disposable household income and household consumption by cutting income and consumption taxes. If Germany imposes austerity, unemployment will force the peripheral countries into the unenviable choice either of absorbing that surge in unemployment themselves, or of forcing the unemployment back onto the core countries by abandoning the currency that is at the heart of their lack of competitiveness

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