Date:
29 August 2012
What is the biggest fear hanging over China? Slowing external demand? Could it be the imbalances in its domestic economy? Or the country’s real estate bubble? While these threats are real and challenging nonetheless, debt is China’s most worrying, not to mention understated, problem. As we saw very clearly in the last two years in Europe, debt crises are often downplayed and sneak up on us when we least expect it.
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Date:
21 August 2012
Recent economic data has shown that China is slowing down. The question is: Should we attempt to revive growth in the world’s second largest economy? Perhaps not. As it is, China bulls have been late in recognising the unhealthy implications of China’s imbalances and, more often than not, have failed to understand that rebalancing cannot occur unless accompanied by a rise in real interest rates and a subsequent fall in investment and growth levels.
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Date:
5 July 2012
In the seven years since Beijing promised with increasing urgency to rebalance its economy, China has unfortunately managed to rebalance externally without rebalancing internally. China’s growth has been propelled by state-driven domestic investment, rather than consumption, and despite the availability of cheap capital and socialised credit risks, loan demand and investment levels remain low. Is it any wonder the number of China sceptics is on the rise?
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Date:
21 June 2012
Globalisation was the buzzword for several years before the global economic crisis hit. Globalisation brought about promises of increased connectivity, growth, greater transfer of knowledge and wealth. Yet, recent economic drama shows that the process of globalisation brings about higher volatility, making the world economy a lot more vulnerable to contagion and external shocks. Have we been wrong? Will globalisation go bankrupt?
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Date:
28 May 2012
As recently as six months ago, one didn’t discuss in polite company in Madrid the possibility that Spain would leave the euro and restructure its debt. The prospect was unthinkable and like many unthinkable things it could not be discussed. But perhaps things have changed. If responsible policymakers, advisors, the press, and public intellectuals are indeed discussing and debating the future of the euro now, a real and open debate about Spain’s prospects will quickly move the consensus towards abandoning the euro.
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Date:
15 May 2012
The future of the global economy remains shrouded in mystery. Whether the crises in the United States and the eurozone will improve remains to be seen. While the latest economic data from China largely points to a soft landing, until the Chinese economy rebalances, it will not emerge from its own domestic crisis. In fact, China will be the last major economy to emerge from the global crisis.
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Date:
12 April 2012
China’s economy is grossly imbalanced, and for years many academics have been talking about an imminent rebalancing. For now, it is clear is that China’s rebalancing act will not be automatic. Rich as China may be, weaknesses in China’s economic model will constrain the options Beijing can take. But the bigger question is, does China have the political will to address this problem?
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Date:
16 March 2012
China’s woes do not stem directly from the fact that its local governments are struggling to repay its bank loans. After all, it has been correctly argued that the Chinese government can afford to, and will most likely allow the debt to ‘roll over’ to the country’s main balance sheet. But the key problem here is two-fold: China’s debt is rising and it will eventually blow up. Secondly, China needs to identify and ensure that its long-run engine of growth works, given the weak links that exist in China’s socio-economic model.
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Date:
27 January 2012
China’s success story is one that would certainly go down the chapters of economic history. While the West firefights its debt crisis, many fail to realize that China too has her own fair share of debt. The overinvestment theory has gained greater attention from academics and politicians alike, and China is now looking to boost internal consumption as its engine of growth. However, unless Beijing has new tricks to cover its losses, her bad debt will put downward pressure on consumption growth.
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