Any contagion from US banking crisis?

Tweet #Rightways

 

 

THE collapse of four banks in the United States and Europe has sent fears of systemic risks throughout the global banking system.

Currently, the risk of contagion in Malaysia is low, given the limited direct and indirect exposure of the domestic banking system as well as the swift action taken by United States and Swiss regulators to contain their respective banking crises.

Banks in Malaysia are also generally well-capitalised with healthy liquidity positions, underpinned by a stable and diversified funding base.

Moreover, Bank Negara keeps a close watch on all banks operating locally as compared to the two-tier system in the United States, said RHB Banking Group regional sector head, group wholesale banking David Chong Voon Chee.

The United States has a dual banking system, with national banks regulated on the federal level and state banks regulated by each state.

Still, we should monitor for second and third order effects from these events, where possible cause-and-effects could lead to market volatility, tighter access to credit and ultimately, slower global growth.

In the United States, Californiabased Silicon Valley Bank (SVB) and New York’s Signature Bank, collapsed due to heavy losses on their bond portfolios and a huge run on deposits.

San Diego-based Silvergate Bank, which catered largely to cryptocurrency companies, had voluntarily wound down its operations.

As investors began ditching out anything related to banking risks, Switzerland’s scandal-ridden Credit Suisse also collapsed as its largest shareholder, Saudi National Bank, stopped investing in it.

As a result of the banking crisis in March, 2023, the jump in risk indicators – credit default swaps of major US and European banking names as well as US sovereign credit default swaps – has become worrying.

However, their levels are still far from the highs of the global financial crisis of 2008.

A credit default swap is a financial derivative that allows investors to offset their credit risks with that of another investor.

But volatility outside of rates – in other asset classes like foreign exchange, equities and commodities – remain relatively modest by historical standards, implying that the crisis is not systemic, said United Overseas Bank in a report.

In the case of Malaysian banks, beyond the minimum level of 8% for total capital ratio (TCR), excess capital stands at about Rm196bil, as of January.

Meanwhile, TCR (the ratio of total capital to total risk-weighted assets) at 18.9% in January is way above the prescribed level of 8%.

This means that banks have substantial buffer in their capital levels where they are able to absorb a significant amount of loans impairment and market volatility, said Bank Muamalat chief economist and social finance, Mohamed Afzanisam Abdul Rashid.

Despite external uncertainties, this indicates that borrowing and lending activities can be conducted seamlessly, while households and businesses are able to access credit from the banking sector without hassle.

Nevertheless, every financing application will be subjected to their eligible criteria including repayment history and the level of indebtedness.

Malaysian banks also usually have a relatively smaller portion of assets in investments while interest rate increase is less drastic, and hence, the mark-to-market losses would be comparatively smaller, said Fortress Capital Asset Management Sdn Bhd CEO Thomas Yong.

If a security was bought at a certain price and the market price dropped later, it would result in an unrealised loss, marking the security down to the new market price would lead to mark-to-market losses.

Malaysian banks also have a large portion of household depositors, while business depositors are diversified across different industries.

Hence, the need for a large amount of liquidity to fund withdrawals is less urgent.

While there will be jitters, banks in Malaysia are well-regulated besides having a diversified depositor base, they also have retailers who are more loyal, said Etiqa Insurance and Takaful chief strategy officer Chris Eng.

The funding base of the Malaysian banking system remained strong, with an aggregate liquidity coverage ratio (LCR) and net stable funding ratio of 154% and 118.2% respectively, at the end of 2022.

The LCR seeks to ensure that banks hold sufficient high-quality assets, while the net stable funding ratio calculates the proportion of available over required stable funding.

More than 80% of banks’ high quality liquid assets are in the form of placements with Bank Negara and government bonds, which banks can access and pledge in the interbank market or with Bank Negara for additional liquidity, according to Maybank Investment Bank in a report.

Foreign currency external debt-at-risk was manageable, at Rm80.4bil or 20.3% of total banking system external debt.

Loans under repayment assistance programmes declined to 4.2% of total banking system loans at the end of 2022, from 5.7% at the end of June, 2022.

Loan loss coverage ratio (which indicates how protected a bank is against future losses), including regulatory reserves, remained high at 118.2% at the end of 2022.

Since the Asian Financial Crisis in 1997, Malaysia’s banking industry has gone through a significant consolidation which brought down the number of banks from more than 60 to about 10 banks by early 2020.

Non-performing loans had led to the creation of Danaharta Nasional to address non-performing accounts while banks concentrated on running their businesses.

Risk management oversight was implemented at a robust pace and Malaysian banks were required to run multiple scenarios for the stress testing of their balance sheets.

This resulted in well-capitalised and highly liquid banks as well as sound credit underwriting standards.

Following the recent banking crisis, banks especially those in the United States and Europe, now need to defend and fight for their credit worthiness.

While fears of contagion are being allayed for now, caution and constant monitoring will prevail. 

• by Yap Leng Kuen is a former StarBiz editor.

 

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It’s impossible for South Korea to enjoy being monitored: Global Times editorial

 

Facts repeatedly prove that the US, which believes in the principle of power, is not softer on its allies when it comes to using intelligence as a tool for blackmailing and coercion than it is toward a powerful “opponent.”

 

 

 

NATO’s expansion stumbles as members calculate costs

Tweet #Rightways

 

 

 

Europe will certainly not become more secure after this round of NATO expansion

 There is a lack of mutual understanding and compromise in European culture, where countries are focused on maximizing their own security interests without regard for others. The US is certainly glad to see Europe in this state.

 

 

 

Editor’s Note:

NATO, which is constantly looking for imaginary enemies and justifying its existence by inciting confrontation, is holding a summit from Tuesday to Thursday, and it also plans to extend its tentacles to the Asia-Pacific region. Behind its aggressive narrative, contradictions and divisions within NATO have become increasingly prominent. The Russia-Ukraine conflict is not going according to NATO’s playbook. This series of articles will provide some clues regarding NATO’s predicament. This is the fifth piece.

NATO, the North Atlantic Treaty Organization, was established in 1949, but to this day it remains an important tool for suppressing the opponents of the West. The initiative to unite 12 countries originally belonged to the United States, which became the most powerful world leader after the end of World War II. The US was the foundation of the organization’s military power, a source of economic and financial assistance to member countries. It goes without saying that not only the highest command posts belonged to the Americans, but they also defined strategic objectives at all stages of NATO’s activities. The main mission of this organization from the very beginning was the unification of military and economic resources under the command of the US to prepare an all-out war against the Soviet Union. The countries of another military bloc, the Warsaw Pact Organization (ATS), led by the USSR, also became enemies. It was created only six years after NATO – in 1955.

NATO played an important role in weakening the USSR and its allies. After the collapse of the Soviet Union and the dissolution of the Warsaw Pact in 1991, the question arose about the feasibility of continuing the existence of NATO. But the US, which really ruled the bloc, set a new task for it – to involve former ATS member countries and post-Soviet republics in its structure. This was considered necessary to expand the zone of America’s strict control over Europe as the most important part of the world at that time. NATO was also used to “sweep” the European space during the war against Yugoslavia. NATO and its de facto twin in the field of economics and politics – the European Union – were used in organizing the “color revolution” in Kiev and provoking the current Ukrainian crisis. In these situations, the US uses NATO as a tool for dirty work, saving the US from the loss of “precious American lives” and the risk of retaliatory strikes on the territory of the US.

NATO’s successful fulfillment of its tasks in Europe led Washington to think about using the potential and experience of the bloc in another part of the world. Having recently identified China as the most serious threat to the international order, Washington is faced with a lack of resources to contain and suppress the growing Chinese power.

In order to mobilize the existing resources, the Biden administration has developed a concept of Indo-Pacific security, strongly resembling a similar concept for the North Atlantic. The concept has already been reinforced by the creation of the Indo-Pacific Command of the US Armed Forces. Already available resources were activated – military alliances with Japan, South Korea and Australia. The AUKUS military group was created. The activity of the QUAD military-diplomatic group is stimulated. The creation of the Indo-Pacific Economic Framework was recently announced. But even these actions are not enough for Washington.

Therefore, it is urgently necessary to extend the scope of NATO’s responsibility to the Indo-Pacific region as well. Obviously, US efforts are aimed at uniting all Asian and European allies, their military, economic and geostrategic resources to create a new tool for the realization of American global ambitions. It can be conditionally called the Indo-Pacific Treaty Organization according to the patterns of NATO.

Of course, the arrival of NATO to the East, especially since the new military bloc of the West, will threaten the security interests of Russia as a Pacific power. But first of all, it will be directed against China. Strengthening the militarization of the region will also contradict the interests of economic stability and security of ASEAN, APEC and other groupings of the region.

Serious obstacles may arise in the way of implementing Biden’s chess game. We are not talking about the fluctuations of European satellites in NATO such as “ready for anything” Poland, the “Baltic troika” or the Balkan neoplasms. It is unlikely that we will talk about England with its age-old anti-Chinese traditions and loyalty to Washington at the level of a conditioned reflex. But such large “stakeholders” as Germany, France, Spain and Italy may think hard about the consequences of entering into a military confrontation with China, taking into account their trade and economic interests.

These powers are well aware of the benefits of bilateral trade with China, which amount to tens and hundreds of billions of euros. They are also aware of the intention of the White House to lift trade sanctions against China in an attempt to bring down the threatening increase in inflation. The role of trade and economic “cannon fodder” is unlikely to entice figures claiming some level of independence even within the framework of NATO. In Madrid, the leaders of significant European powers are unlikely to voice their doubts, but then they will try to “put on the brakes” in implementation of Biden’s Indo-Pacific plan.

Another important reason for avoiding the dubious honor of becoming a member of the anti-Chinese coalition may be Washington’s inconsistency. Just two years ago, then US president Donald Trump reproached NATO member countries for the insufficiency of military efforts, the desire to “ride for free” and even promised to dissolve the military bloc. What will happen after the next presidential election? Will Trump come back? Won’t those business and political circles that oppose the dispersion of the waning power of their power, for the concentration of resources on solving domestic economic and humanitarian problems, win?

Europeans are already suffering losses from following Biden’s anti-China course. The ratification of the China-Europe Comprehensive Investment Agreement has been disrupted. Taking into account the hostile policy of Poland and the Baltic countries, Chinese logistics companies are reviewing the routes of goods delivery to Europe via the Silk Road. Beijing is studying the experience of “crippling sanctions” against Russia. After all, Washington has threatened to impose similar sanctions not only in case of the aggravation of the situation around the Taiwan island, but even if China refuses to participate in sanctions against Russia.

The US’ convulsive attempts to return itself to the role of world hegemon are unlikely to succeed. But they can cause considerable harm to mutually beneficial relations between countries, which will be difficult to compensate quickly.

The author is head of the “Russian Dream-Chinese Dream” analytic center of the Izborsk Club. opinion@globaltimes.com.cn 

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Asia-Pacific countries should not stand under ‘dangerous wall’ of NATO: Global Times editorial

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THE GLOCALISATION OF HUMANITY

Tweet #Rightways

 
https://youtu.be/oS5QqS9C_xw

 

Few Westerners see the irony of a supposedly closed China celebrating the 100th anniversary of the founding of the Chinese Communist Party (CCP), when communism was born but essentially rejected in the West. What was it about Marx that resonated with Chinese civilisation that prided itself with its own ancient and enduring philosophy? (PIC: Chinese President Xi Jinping waves as he attends a gala in connection with the anniversary – AP)

 “Globalisation is interpreted as universalisation of American or European values and standards. But the fact remains that these standards and rules were imposed historically by conquest, colonisation and force“.

 

China Does Not Recognize The Rule-Based International Order imposed historically by Conquest, Colonisation and Force !

 

 https://youtu.be/_ThU1vvW0A4

China has never interfered in the internal affairs of other countries and never obstructed their development. It will never accept any country interfering in China’s internal affairs and obstructing its development. Today’s China has long been different from the China of 100 years ago. No one and no force should underestimate the Chinese people’s firm will and strong ability to defend national sovereignty, security, and development interests.

WHY is Marxism thriving in China and not in Marx’s place of birth? Why is Buddhism more practiced in East Asia than in India? Why has Islam more followers outside Saudi Arabia?

Ideas and religion spread through globalisation, but it was really their localisation that created more believers and followers.

What succeeded was not globalisation, but glocalisation, the internalisation of universal ideas and beliefs by the many, and not just the few.

Few Westerners see the irony of a supposedly closed China celebrating the 100th anniversary of the founding of the Chinese Communist Party (CCP), when communism was born but essentially rejected in the West.

What was it about Marx that resonated with Chinese civilisation that prided itself with its own ancient and enduring philosophy?

London School of Economics Emeritus Professor Megnai Desai, writing on “Marx’s Revenge”, made the shrewd observation that the Chinese Revolution in the 20th century was very different from the French and American Revolutions in the 18th century.

The French Revolution was a domestic rebellion against the monarchy and the landed gentry, whilst the American Revolution was rebellion against British foreign domination

Both created republics and preached equality, liberty and freedom, but both went on to create empires, one by conquering lands from the native Indians and Mexico, and the other through Napoleon’s rampage in Europe.

The Chinese Revolution was different because it was simultaneously a struggle against foreign invasion (Japanese and earlier Eight Nations Alliance) as well as the Nationalist government that favoured the capitalist and landed classes.

The CCP won because it represented the rural peasantry, rather than adopting the Comintern strategy of starting the revolution from the cities. In short, the CCP localised universal Communism with Chinese characteristics. It was practical rather than ideological.

By the time of the fall of the Qing Dynasty in 1911, Chinese thinkers struggled with what would replace the old order.

The country fell into warlordism. The Nationalist Party under Sun Yat-sen struggled to balance the conservative wing that represented the landlords and capitalists, and the left wing influenced by Communism and socialism.

Chinese revolutionaries followed closely the Russian Revolution in 1917, because it was then the most recent model of social transformation. The Chinese elite understood that the rebuilding of China from the collapse of the old order was a monumental task. The country was backward and the uneducated masses were unprepared for modernity, vulnerable to foreign conquest.

Even though they felt the burden of history, they also understood that there was no parallel in history on the scale of Chinese transformation.

The Chinese Left took to Marxian thinking because Marx gave both a historical and political economy perspective on how capitalism would evolve, as well as a philosophical tool in terms of Hegelian dialectics.

Marx used the profound insights of the Prussian philosopher Hegel that transformations come from contradictions of opposites, in which change will not happen in a smooth line, but through revolution or discontinuity.

Marx’s discovery of dialectic materialism – in everything, the contradiction and interaction between opposites lead to the destruction of the old and emergence of the new – was music to the ears of those who sought a path out for the New China.

Furthermore, the fundamental ideas of dialectics were very similar to the Chinese yin-yang philosophy of the I Ching and Dao Dejing. As Lenin put it, “dialectics is the study of the contradiction within the very essence of things. Development is the struggle of opposites.”

Having theory is one thing, but putting these ideas into practice is another. We can only appreciate China’s miraculous transformation from a backward economy to the second largest economy in the world by understanding that this was done through essentially three dictums: “seek truth from facts”, crossing the river by feeling the stones” and “it doesn’t matter whether a cat is black or white, as long as it catches mice.”

In other words, make fact-based decisions, always try or test under uncertainty, and above all, be practical and have an open mind. Change is a process between conflicting contradictions. There is no absolute black and white.

Historian Ray Huang, one of the finest sinologists of his generation and a former Nationalist soldier, wrote in the Preface to his classic “China: A Macro-History”: “Chinese history differs from the history of other peoples and other parts of the world because of an important factor: its vast multitudes.

In the imperial period as well as in the very recent past, practical problems had to be translated into abstract notions in order to be disseminated.

In turn, at the local level the message had once again to be rendered into everyday language.”

It is the reduction of very complicated policies into simple language that the Chinese people had to understand and own that enabled them to buy into the transformation, despite the huge sacrifices at the individual and community levels. The people’s eyes are clearer than those of the elites.

The US-China rivalry has done the world a favour by contrasting very fundamental worldviews. When the West preaches a value and rules-based order, what is meant is that freedom, democracy and individual rights are absolute – essentially a zero-sum “my way or no way.”

Globalisation is interpreted as universalisation of American or European values and standards. But the fact remains that these standards and rules were imposed historically by conquest, colonisation and force.

When China, Russia, India or any other country deviates or disagrees with that, then they must be contained, confronted or sanctioned. Localisation or being different is almost seen as deviant rather than a celebration of diversity.

Civilisations reach their highest levels through tolerance and openness. When they become inward-looking, fundamentalist and mono-thinking, fragility and decay sets in.

The world is simultaneously becoming more global in inter-connectivity, even as regionalisation, fragmentation and localisation speeds up.

Glocalisation, the simultaneous contradiction between global and local, is to be welcomed, rather than feared.

The future will always be open, uncertain and contradictory. Such diversity is the nature of humanity.

Andrew Sheng comments on global affairs from an Asian perspective. The views expressed here are his own

Source link

 

 

Footage of a brutal gang attack on Asian students |Daily Mail …

 https://www.dailymail.co.uk/news/article-9751931/Footage-brutal-gang-attack-Asian-students.html

 

 

•  

 

The much larger group attacks the three Asian students outside an Inala shopping centre (pictured) as one girl is pulled to the ground by her hair

 

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THE GLOCALISATION OF HUMANITY

Tweet #Rightways

 

https://youtu.be/oS5QqS9C_xw

 

Few Westerners see the irony of a supposedly closed China celebrating the 100th anniversary of the founding of the Chinese Communist Party (CCP), when communism was born but essentially rejected in the West. What was it about Marx that resonated with Chinese civilisation that prided itself with its own ancient and enduring philosophy? (PIC: Chinese President Xi Jinping waves as he attends a gala in connection with the anniversary – AP)

 

 “Globalisation is interpreted as universalisation of American or European values and standards. But the fact remains that these standards and rules were imposed historically by conquest, colonisation and force“.

 

WHY is Marxism thriving in China and not in Marx’s place of birth? Why is Buddhism more practiced in East Asia than in India? Why has Islam more followers outside Saudi Arabia?

Ideas and religion spread through globalisation, but it was really their localisation that created more believers and followers.

What succeeded was not globalisation, but glocalisation, the internalisation of universal ideas and beliefs by the many, and not just the few.

Few Westerners see the irony of a supposedly closed China celebrating the 100th anniversary of the founding of the Chinese Communist Party (CCP), when communism was born but essentially rejected in the West.

What was it about Marx that resonated with Chinese civilisation that prided itself with its own ancient and enduring philosophy?

London School of Economics Emeritus Professor Megnai Desai, writing on “Marx’s Revenge”, made the shrewd observation that the Chinese Revolution in the 20th century was very different from the French and American Revolutions in the 18th century.

The French Revolution was a domestic rebellion against the monarchy and the landed gentry, whilst the American Revolution was rebellion against British foreign domination

Both created republics and preached equality, liberty and freedom, but both went on to create empires, one by conquering lands from the native Indians and Mexico, and the other through Napoleon’s rampage in Europe.

The Chinese Revolution was different because it was simultaneously a struggle against foreign invasion (Japanese and earlier Eight Nations Alliance) as well as the Nationalist government that favoured the capitalist and landed classes.

The CCP won because it represented the rural peasantry, rather than adopting the Comintern strategy of starting the revolution from the cities. In short, the CCP localised universal Communism with Chinese characteristics. It was practical rather than ideological.

By the time of the fall of the Qing Dynasty in 1911, Chinese thinkers struggled with what would replace the old order.

The country fell into warlordism. The Nationalist Party under Sun Yat-sen struggled to balance the conservative wing that represented the landlords and capitalists, and the left wing influenced by Communism and socialism.

Chinese revolutionaries followed closely the Russian Revolution in 1917, because it was then the most recent model of social transformation. The Chinese elite understood that the rebuilding of China from the collapse of the old order was a monumental task. The country was backward and the uneducated masses were unprepared for modernity, vulnerable to foreign conquest.

Even though they felt the burden of history, they also understood that there was no parallel in history on the scale of Chinese transformation.

The Chinese Left took to Marxian thinking because Marx gave both a historical and political economy perspective on how capitalism would evolve, as well as a philosophical tool in terms of Hegelian dialectics.

Marx used the profound insights of the Prussian philosopher Hegel that transformations come from contradictions of opposites, in which change will not happen in a smooth line, but through revolution or discontinuity.

Marx’s discovery of dialectic materialism – in everything, the contradiction and interaction between opposites lead to the destruction of the old and emergence of the new – was music to the ears of those who sought a path out for the New China.

Furthermore, the fundamental ideas of dialectics were very similar to the Chinese yin-yang philosophy of the I Ching and Dao Dejing. As Lenin put it, “dialectics is the study of the contradiction within the very essence of things. Development is the struggle of opposites.”

Having theory is one thing, but putting these ideas into practice is another. We can only appreciate China’s miraculous transformation from a backward economy to the second largest economy in the world by understanding that this was done through essentially three dictums: “seek truth from facts”, crossing the river by feeling the stones” and “it doesn’t matter whether a cat is black or white, as long as it catches mice.”

In other words, make fact-based decisions, always try or test under uncertainty, and above all, be practical and have an open mind. Change is a process between conflicting contradictions. There is no absolute black and white.

Historian Ray Huang, one of the finest sinologists of his generation and a former Nationalist soldier, wrote in the Preface to his classic “China: A Macro-History”: “Chinese history differs from the history of other peoples and other parts of the world because of an important factor: its vast multitudes.

In the imperial period as well as in the very recent past, practical problems had to be translated into abstract notions in order to be disseminated.

In turn, at the local level the message had once again to be rendered into everyday language.”

It is the reduction of very complicated policies into simple language that the Chinese people had to understand and own that enabled them to buy into the transformation, despite the huge sacrifices at the individual and community levels. The people’s eyes are clearer than those of the elites.

The US-China rivalry has done the world a favour by contrasting very fundamental worldviews. When the West preaches a value and rules-based order, what is meant is that freedom, democracy and individual rights are absolute – essentially a zero-sum “my way or no way.”

Globalisation is interpreted as universalisation of American or European values and standards. But the fact remains that these standards and rules were imposed historically by conquest, colonisation and force.

When China, Russia, India or any other country deviates or disagrees with that, then they must be contained, confronted or sanctioned. Localisation or being different is almost seen as deviant rather than a celebration of diversity.

Civilisations reach their highest levels through tolerance and openness. When they become inward-looking, fundamentalist and mono-thinking, fragility and decay sets in.

The world is simultaneously becoming more global in inter-connectivity, even as regionalisation, fragmentation and localisation speeds up.

Glocalisation, the simultaneous contradiction between global and local, is to be welcomed, rather than feared.

The future will always be open, uncertain and contradictory. Such diversity is the nature of humanity.

Andrew Sheng comments on global affairs from an Asian perspective. The views expressed here are his own

Source link

 

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World main countries 2021 Q1 GDP Growth Infographic: Wu Tiantong/GT Xi Jinping: Chinese people will never
allow foreign bullying, oppres..

 

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Why Europe gravitates away from US to Eastern power center: Martin Jacques

Tweet #Rightways

 

What will happen to Europe? Will it continue with a broadly pro-American orientation, or will it pursue an increasingly independent position?

Either way, the consequences will be far-reaching. At the heart of the West lie the US and Europe. If Europe seeks a more autonomous role, then the West will be seriously weakened.

The end of the Cold War marked a major moment in US-Europe relations. Europe was no longer dependent on the US for its defense and ever since, slowly but remorselessly, a growing distance has opened up between them. This was accelerated by two key events ̶ the US invasion of Iraq, opposed by most Europeans, and the Donald Trump phenomenon, which most Europeans found beyond the pale.

President Joe Biden wants to mend the fences and return to something closer to the pre-Trump relationship. He may have some success because, unlike Trump, Biden will seek to befriend rather than castigate Europe. But there will be no simple return to the pre-Trump era: too much has happened, too much has changed.

A recent opinion poll by the European Council on Foreign Relations across 11 European countries reveals what can only be described as a sea-change in European attitudes in the post-Trump era. Six in 10 Europeans believe that the US political system is broken and that China will become a stronger power than the US in the next10 years. A majority now want their country to remain neutral in any conflict between the US and China.

A majority of Germans believe that, after voting for Trump in 2016, Americans can no longer be trusted; across Europe likewise more people agreed than disagreed with this statement. The survey grouped the respondents into four categories. The smallest, 9 percent of the total, believed that the EU was broken and the US would bounce back. A second group, around 20 percent of the total, believed that both the US and the EU would continue to thrive. A third group, 29 percent of the total, thought that both the US and the EU were broken and declining. A fourth group, 35 percent of the total, believed that the EU was healthy, but the US was broken. The latter two groups, almost two-thirds of the total, expected that the US would soon be displaced by China.

There has clearly been a profound shift in European attitudes consequent upon the decline of the West since the 2008 financial crisis, the Trump presidency and the rise of China. These, we must remind ourselves, are very recent developments which have happened with remarkable speed. Far from reinforcing the Atlantic alliance and the relationship with the US, their main impact on Europeans has been to weaken those bonds, elicit a growing acknowledgement that the world has changed profoundly and foster a belief that Europe needs to be more independent. Of course, these trends are still young and fluid. Many conflicting forces are at work with attitudes ebbing and flowing both within and between countries. Criticism of China has grown apace in the recent period in Europe, as it has in the US. But there is one fundamental difference. While the US is bent on defending its global primacy, Europe long ago abandoned any such pretensions, thereby greatly reducing the sources of friction and animosity between it and China in comparison with the US.

The survey reveals that by far the dominant trend is toward a more independent-minded Europe, a growing skepticism about the US and a sign of recognition that China will soon become the dominant power in the world. The European leader who most symbolizes this outlook, and has pioneered this way of thinking, is German Chancellor Angela Merkel. The recently agreed EU-China Comprehensive Agreement on Investment, very much in Merkel’s image, is a powerful demonstration of the EU’s willingness to pursue its own independent relationship with China rather than following the Americans.

The trend toward a growing distance between Europe and the US will be slow, tortuous, conflict-riddled, and painful. Europe has looked westward across the Atlantic ever since Christopher Columbus. It was European settlers who colonized Northeast America and subsequently established the US. The latter was a European creation which over time was to outperform its ancestral continent. If Europe colonized much of the world, the post-1945 world order was a Western creation, with the US the dominant partner and Europe very much a junior partner. In sum, an enormous historical, intellectual, political and cultural hinterland binds the US and Europe together. But we are now in new territory. American decline means that it has increasingly less to offer Europe.

The gravitational pull of China, and Asia more generally, is drawing Europe eastward. Nothing illustrates this phenomenon better than the China-proposed Belt and Road Initiative. Slowly but surely, bit by bit, Europe is becoming more and more involved ̶ first the countries of Central and Eastern Europe, then Portugal, Greece and Italy, and others over time will in all likelihood follow. What drew Europe westward is now drawing it eastward: the centre of gravity of the global economy, once in the west, is now in the east.

The author was until recently a Senior Fellow at the Department of Politics and International Studies at Cambridge University. He is a Visiting Professor at the Institute of Modern International Relations at Tsinghua University and a Senior Fellow at the China Institute, Fudan University. Follow him on twitter @martjacques. opinion@globaltimes.com.cn

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Covid-19 reaches the West

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Tourists wearing protective masks walks by the Duomo in central Milan on February 27,2020 amid fears over the spread of the novel Coronavirus. – The number of COVID-19 infections in Italy, the hardest hit country in Europe, hits the 400 mark late on February 26, with 12 deaths. (Photo by Miguel MEDINA/ AFP)

But keep cool, negative volatility will likely be followed by positive volatility

The coronavirus (Covid-19) outbreak has officially reached Western shores.

Since last week, the virus has spread to Europe, Brazil and the Middle East.

New cases have emerged across Europe.

There have been more than 81,000 people infected with nearly 3,000 deaths so far.

Just the previous Wednesday on Feb 19, stocks in the US were complacently at record highs, never mind that Asian markets were roiling and taking huge hits, thanks to the coronavirus that first took roots in Wuhan, China.

Asia has been battling this disease since January. Markets have been volatile but have since recovered as the number of infections have reduced and governments have been diligent at handling the disease.

It is like the domino effect, with the same reactions, panic and emotions that happened throughout Asia now migrating to the West.

It is almost deja-vu, seeing the fear and market reaction, no doubt the impact to the Dow and S&P 500 has a significantly larger impact.

The Covid-19’s largest impact is the fear it has transmitted with rapid speed.

In the US, stocks fell for a sixth straight day on Thursday, with the S&P 500 price index falling 4.4% and bringing this pullback officially into correction territory. On a six-day basis, the Dow Jones was down 13.4% at 25,766.64.

This plummet followed California governor Gavin Newsom’s revealing on Thursday that the state was monitoring 8,400 people for potential Covid-19 infections.

Adding to the bleak outlook, Goldman Sachs slashed its profit outlook and warned the outbreak could cost Donald Trump his reelection in November.

The MSCI all-country global index has dropped more than 7% over this six-day period. Considering stocks were at record highs the previous Wednesday, this is very harsh and painful.

Why, Tesla was all the hype earlier in February. It was US$901 on Feb 21, and new higher target prices were being touted by analysts, nevermind that the stock still didn’t have a price to earnings ratio.

In the last five days, Tesla’s share price had tumbled more than US$200 or 32.7% as of Thursday to close at US$679.

Don’t panic

For the average investor, panic has likely set in.

Whose confidence level would not be shaken with a 12% decline in the S&P 500 in six trading days?

Now talk of a 20% decline is starting to emerge.

Meanwhile the 10-year US treasury yield dropped below 1.3%, remaining in record-low territory.

The downward spiral in oil also continued with WTI crude toppling 2.71% to trade at US$47.41 per barrel on Thursday. Brent oil hovered at the US$51.42 level. So just barely two months into 2020, it is Covid-19 which has been responsible for crushing markets and dismantling profits across the globe.

Many have already slashed market forecasts for the year.

In the past two market stories featured on StarBizweek, readers would know that Fisher MarketMinder thinks that fears over the virus’ market impact are overdone. It thinks that this is part of a longer-running pattern prevalent throughout this bull market.

“The stock market will do what it does – rise and fall.

“If you’ve got a plan based on your risk tolerance and investment horizon, don’t let fear make you swerve in the wrong direction and lose traction.

“Panic is never a good investment strategy, ” says Fisher MarketMinder.

It adds that Covid-19 is grabbing attention because it is new and somewhat novel, but that doesn’t mean its economic effects far outweigh more familiar diseases.

The Center for Disease Control and Prevention estimates that there were 34,200 deaths in the United States from influenza during the 2018-2019 flu season.

For infections of Covid-19 outside of China, the mortality appears very low.

Furthermore, the people who are dying tend to be the old and immuno-suppressed or otherwise sick.

“Supply chain disruptions as officials work to contain the outbreak probably dent growth temporarily, but markets are efficient and likely pricing in these expectations as companies issue statements.

“Short-term volatility could linger, but patience should pay off, in our view, ” it adds.

As legendary investor Ben Graham once said, stocks are a voting machine in the short term and a weighing machine in the long term.

“Sentiment wins in the short term, but fundamentals matter most over more meaningful stretches.

“The ‘why’ and ‘how much’ behind sentiment swings strike us far less important.

“The emotional swing itself is what matters.

“Market fundamentals likely didn’t change on a dime seven days ago, ” says Fisher MarketMinder.

Thursday’s drop simply put US stocks back at mid-October levels.

Furthermore, the world hasn’t fundamentally changed.

While there is no way to know when this drop will end or how much further it will fall, no drop is permanent.

“Whether the rebound starts in days or weeks, whether it is fast or slow, if you have held on thus far, we think you ought to reap the good that comes with the bad.

“Corrections hurt your long-term returns only if you don’t participate in the rebounds that follow them.

“Selling may feel good at a time like this. But when you remove emotion from the equation, all it does is transform a market decline into an actual portfolio loss, ” says Fisher MarketMinder.

Another investor who is cheering is one of the smartest investors in the world, Warren Buffett, chairman and CEO of Berkshire Hathaway.

He says the stock market rout we’re witnessing today is “good for us.”

“We’re a net buyer of stocks over time, ” he says on CNBC.

“Most people are savers, they should want the market to go down.

“They should want to buy at a lower price.”

Buffett’s comments came as Dow futures were down by about 800 points or 3% on Monday as stocks around the world plunged as the Covid-19 outbreak escalated.

Regarding the coronavirus specifically, Buffett made clear that he is “not a specialist.” And he warns that “a very significant percentage of our businesses one way are affected.”

However, he reiterates that investors should be more focused on the long term, not the short term.

“If you’re buying a business, and that’s what stocks are… you’re gonna own it for 10 or 20 years, ” he says.

“The real question is has the 10-year or 20-year outlook for American businesses changed in the last 24 hours or 48 hours?” the legendary investor asks.

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Posted by righways at 5:23:00 PM

Chinese varsities hold seven top spots in world ranking

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Beijing: Universities from the Chinese mainland have secured seven of the top 10 positions in the Times Higher Education’s Emerging Economies University Rankings 2020 for the third straight year.

Tsinghua University maintained its position at the top in the listing of institutions from emerging economies.

Peking University was in second place for the second year running.

Zhejiang University and the University of Science and Technology of China remain in third and fourth place, while Shanghai Jiao Tong University climbed from eighth to sixth. Fudan University was listed in seventh place, while Nanjing University was ninth.

Other institutions in the top 10 include Moscow State University (fifth), National Taiwan University (eighth), and The University of Cape Town (10th).

Phil Baty, chief knowledge officer at Times Higher Education, said: “China’s success in our Emerging Economies University Rankings reflects its rapid rise on the world higher education stage. With the Double First Class Initiative driving improvements across participant universities, we expect it to continue to establish itself as a major global player in providing world-class higher education over the coming years.”

The Double First-Class Initiative refers to fostering “world-class universities” and “world-class discipline”. — China Daily/ANN

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Spain welcomed President Xi visit, signed 10 deals worth US$17.6 bln, pledged stronger BRI ties against protectionism, unilateralism

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China, Spain sign 10 deals worth US$17.6 bln

Chinese President Xi Jinping (L) meets with Spanish Prime Minister Pedro
Sanchez in Madrid, Spain, Nov. 28, 2018. (Xinhua/Xie Huanchi)

 

Chinese and Spanish enterprises have signed ten deals worth 17.6 billion U.S. dollars during President Xi Jinping’s visit to Spain from November 27 to 29.

These deals cover the areas of finance, telecommunication, environment, machine, vehicle and medicine, hitting a new record of China-Spain trade and economic cooperation, said the spokesperson of China’s Ministry of Commerce (MOFCOM).

China and Spain also inked intergovernmental cooperation documents such as a
Memorandum of Understanding in the Third Party Market, Avoidance of Double Taxation and the Prevention of Fiscal Evasion and Inspection and Quarantine of Imported Pork Products and so on.

During the visit, China-Spain Business Advisory Council was formally established and the first meeting was successfully held, becoming another platform for deepening bilateral economic and trade relations.

Xi’s visit coincides with the 45th anniversary of the establishment of diplomatic
ties between the two countries, and the two sides have enjoyed excellent trade relations through all these years.

China is Spain’s sixth largest trading partner in the world and the largest trading partner outside the EU. From January to September 2018, the bilateral trade
volume hit 25.35 billion U.S. dollars, according to the MOFCOM.

China, Spain pledge stronger BRI ties against protectionism, unilateralism

China and Spain are cooperating in the Belt and Road  initiative (BRI), yielding positive outcomes, and will continue to leverage the platform to oppose protectionism and unilateralism, Chinese experts said.

The comments came after a joint statement between the two countries during Chinese President Xi Jinping’s three-day visit to Spain.

Zhao Junjie, a research fellow at the Chinese Academy of Social Sciences’ Institute of European Studies, told the Global Times on Thursday that Spain has seen opportunities in cooperating with China on BRI.

“Although Spain faces pressure from conservatives who oppose free trade, the two countries’ cooperation on BRI will not be interrupted,” Zhao said, citing the freight train between China’s small commodity hub of Yiwu and Madrid as a typical BRI achievement and an important bridge across Eurasia.

“Trains were not fully loaded when the line was first launched in 2014, but fully-loaded trains now depart every day from China,” the research fellow said, while stressing that  Spain has a privileged position on the route.

Boosted by the route, Yiwu’s imports from Spain surged 8.82 percent year-on-year to
60 million yuan ($8.6 million) in the first 10 months.

China is Spain’s largest trading partner outside the EU, while Spain is the sixth-largest trading partner within the bloc for China. Bilateral trade  reached $22.37 billion in the first eight months, up 10.6 percent year-on-year, according to the Chinese Ministry of Foreign Affairs.

Ding Chun, director of the Center for European Studies at Fudan University in Shanghai, told the Global Times that among EU members, Spain has shown stronger support for the BRI.

Both sides believe the Belt and Road initiative, as a platform of connectivity, will strengthen economic, trade and investment cooperation in third-party markets.

The two countries also stand ready to build synergy between BRI and related
EU strategies, thus offering more mutually beneficial business and investment opportunities to Chinese and Spanish enterprises.

“On Spain’s side, such cooperation in the third-party markets such as Africa
will alleviate its refugee problem. It would also spark less geopolitical concerns than China-led projects in Europe,” Ding said.

China and Spain can cooperate on clean energy, including wind and tide
energy, Zhao said, noting that cultural exchanges should also be strengthened through education, tourism and sports.

“Cooperation with Spain’s small and medium enterprises should be given greater consideration,” Zhao noted.

“There are historical and geographic bases for China and Spain to conduct cooperation on the BRI,” Xi said during a meeting with Spanish Prime Minister Pedro Sanchez on Wednesday, the Xinhua News Agency reported.

Sources: Global Times

China leads the way as world’s billionaires get even richer

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The United States created 53 new billionaires in 2017, down from 87 five years ago

China produced around
two new billionaires a week last year as the fortunes of the world’s
ultra-rich soared by a record amount, a report said Friday.Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

China produced two new billionaires a week last year as the fortunes of the world’s ultra-rich soared by a record amount – AFP

China produced around two new billionaires a week last year as the fortunes of the world’s ultra-rich soared by a record amount, Swiss banking giant UBS and auditors PwC said.

Billionaires’ wealth enjoyed its “greatest-ever” increase in 2017, rising 19 percent to $8.9 trillion ($7.8 billion euros) shared among 2,158 individuals, said the report by Swiss banking giant UBS and auditors PwC.

But Chinese billionaires expanded their wealth at nearly double that pace, growing by 39 percent to $1.12 trillion.

“Over the last decade, Chinese billionaires have created some of the world’s largest and most successful companies, raised living standards,” said Josef Stadler, head of Ultra High Net Worth at UBS Global Wealth Management.

“But this is just the beginning. China’s vast population, technology innovation and productivity growth combined with government support, are providing unprecedented opportunities for individuals not only to build businesses but also to change people’s lives for the better.”

The report said China minted two new billionaires a week in 2017, among more than three a week created in Asia.

In the Americas region, the wealth of billionaires increased at a slower rate of 12 percent, to $3.6 trillion, with the United States creating 53 new billionaires in 2017 compared to 87 five years ago.

Currency appreciation saw European billionaires’ wealth grow 19 percent although the number of billionaires rose by just 4.0 percent to 414.

Wealth transition from just five families accounted for 30 percent of the continent’s wealth expansion, the study said.

It warned of lower economic growth in the United States and China if the trade war between the two countries escalates.

“US and Asia ex-Japan equities could fall by 20 percent from their mid-summer 2018 levels.”

Asia challenging US dominance

For China’s young billionaires “the country’s fundamentals of a huge population and rising technology will continue to offer fertile conditions for entrepreneurs to grow their businesses,” the study said.

It there were only 16 Chinese billionaires as recently as 2006.

“Today, only 30 years after the country’s government first allowed private enterprise, they number 373 – nearly one in five of the global total.”

It said 97 percent of them are self-made, many of them in sectors such as technology and retail.

Billionaires from Asia, especially in the Chinese city of Shenzhen, are now challenging the traditional dominance of Americans as technology entrepreneurs.

“In 2017, they equalled America’s level of venture capital funding for start-ups, registered four times as many Artificial-Intelligence-related patents and three times as many blockchain and crypto-related patents as their US counterparts.”

Ravi Raju, head of Asia Pacific Ultra High Net Worth at UBS Global Wealth Management, said Asia’s billionaires “are young and relentless. They are constantly transforming their companies, developing new business models and shifting rapidly into new sectors.”

The report said that globally, self-made billionaires have driven 80 percent of the 40 main breakthrough innovations over the last 40 years.
UP AND OUT OF POVERTY – Xi Jinping https://youtu.be/SYWz2bwCUEE

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Asia’s billionaires see fastest wealth growth: report

September 17, 2014

Asia’s billionaires led by Chinese tycoons enjoyed the
fastest increase in their wealth this year compared to their peers in
the rest of the world, a report said Wednesday.

Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

 

Coming recession in 2020? Possibly earlier

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Negative rates: Pedestrians walking past the Bank of Japan (BoJ) headquarters in Tokyo. BoJ’s goal remains at keeping real interest rates as negative as possible, as long as the economy performs. — Bloomberg

IT’S mid-term review time as the US yield curve begins to flatten.

This curve tracks the relationship between interest rates of US government debt obligations. Normally the yield curve is rising, with long-term bonds having yields higher than short-term obligations.

But occasionally the curve inverts, with long bonds yielding less than short Treasury bills – a historical predictor of future recessions and bear markets in stocks. Recently, the curve has become noticeably flatter, with short rates rising and longer yields remaining stagnant. This has led many analysts to think that the yield curve will soon invert.

But that does not mean a recession is imminent. Just returned from an extended visit back to Harvard. Touched base with my mentors and professors at both extremes of the economic spectrum. They are all split on what this flattening really means. In the event it does invert (the gap today being below 0.3%), recession has almost always (over the past 50 years) followed within a year or so. But few see a recession soon on the horizon.

The first half has come and gone. The ongoing transition to more normal conditions continue in the context of a robust US economy; continued progress in the orderly normalisation of US monetary policy; and re-awakened sensitivities to geopolitical and protectionist risks.

There will be higher interest rates, some inflation concerns and trade tariffs coming-on in the context of markets more readily accepting two to three more rate hikes by the Fed in 2018. The prospect of a global trade war makes everyone very cautious.

Once we start down the road of tariff increases and threats of more to come, the dangers of retaliatory miscalculations are real and very scary. Still even an inverted yield curve should not be on top of our worry list under today’s accommodative monetary conditions.

Synchronised pick-up

The world economy benefitted from four drivers of higher growth: the healing process in Europe, re-bound from slowdowns in Brazil, India and Russia; soft landing in China; and pro-growth measures in US.

To persist, Europe needs to do much more. Also, there is hope that recent tariff tensions would eventually lead to fairer and still-free trade which recognises the inter-dependent nature of global supply chains, and show greater willingness to protect intellectual property rights, modernize trade arrangements and reduce non-tariff barriers. Yes, more rate hikes from the Fed are still on the cards. But the same by the European Central Bank (ECB) and Bank of Japan (BOJ) demand trickier manoeuvring.

This is an area that warrants close monitoring since volatility will likely persist. At least for now, fears of Japan-like deflation in US and Europe are effectively gone. But OECD is worried global growth is not yet self-sustaining. It’s strength in 2018 is largely due to monetary and fiscal policy support – and lacking in rising productivity gains and sweeping structural reforms. In Europe, the “clock is ticking”; without reforms, more populist uprisings will appear as the upswing ages and then fades. US inflation is not only returning to the Fed’s 2% target, but also likely to exceed it. In Europe, consumer prices were last still lower than a year ago – below the ECB’s target of just below 2%. Fear of the spectre of deflation has led BOJ to remain cautious about tapering its monetary easing program. Will just have to wait and see.

IMF warns that the world’s US$164 trillion debt pile (at 225% of GDP) is bigger than at the height of the financial crisis a decade ago. One-half was accounted for by US, Japan and China. What’s needed is for US fiscal policy to be recalibrated to bring down the government debt to GDP ratio (80%) and for China to deleverage its US$ 2.6 trillion private debt. There is no sign either is being done which runs the risk of triggering yet another financial crisis.

Growth will falter

Growth in US can slow considerably when the boosts from last year’s tax-cuts in US fades in 2019 and 2020. IMF now warns that US will grow at about one-half the 3% annual pace forecast by the White House over the next 5 years, reflecting the effects of growing massive fiscal deficit and continuing trade imbalance. For US, sluggish productivity remains a key determinant. In 2Q18, GDP picked-up to rise 4.1% (2.2% in 1Q18) the fastest pace in nearly four years, reflecting broad-based momentum.

But worker productivity advanced 1.3% from a year earlier, consistent with the sluggish 1.2% average annual rate in 2007-2017, well below the better than 2% annual average since WWII. Spending by consumers, businesses and government as well as surging exports all appeared solid in 2Q18. The expansion enters its 10th year this month, building on what is already the second longest expansion on record. Faster growth which has helped to drive the unemployment rate to its lowest level in 18 years, fueled quick corporate profit growth.

Median estimates place GDP growth at 2.8% in 2018, 2.4% in 2019 and 1.8% over the long run. But everyone has growth slowing next year because of falling business and consumer sentiment, reflecting trade disputes with China and many US allies, and uncertainty whether rising business investment is sustainable.

The big concern is the economy overheating – already, it is bumping up against capacity constraints as labour markets tighten. Still, the consensus is that the next downturn will not arrive until 2020. Most economists expect 3% inflation over the next year. What worries me most is the deteriorating global political and strategic environment.

Not so much the economic outlook directly. The world is changing too much, too fast.

So much so, the geopolitical situation is getting worse – open warfare between Israel and Iran, the disgraceful state of Palestine, and uncertainties surrounding Donald Trump and Vladimir Putin, and lack of leadership in Europe. Trade barriers are causing much anxiety. It is as though what’s put in place since WWII isn’t worth a damn anymore.

Europe and Japan

Latest indications from the Brookings-FT Index for Global Economic Recovery (Tiger) show global growth has peaked and momentum has started to fade. Indeed, financial markets are already reflecting mounting vulnerabilities. With weak economic data in 1H’18, Europe and Japan have since cooled. In late 2017, eurozone was still growing at 3.5%: Germany at 4%, France 3%, Italy 2% and Spain 3.5%. But activity slackened to only 1.2% in early April; even Germany recorded a sharp dip – down to only 1%, reflecting waning monetary easing effects and supply-side constraints. The outlook is for a strong above trend upswing for the rest of the year. OECD now expects GDP growth in 2018 to be 2.2% (2.6% in 2017) and in 2019, 2.1%.

For eurozone, the window for reforms is closing – ranging from the implementation of dual currencies for its members to putting European Parliament in charge of economic policy, including the euro-budget. Japanese GDP shrank 0.1% in 1Q18 despite a rise in capital investment. Household spending unexpectedly fell. Still, recovery is expected to be driven by a weak yen brought about by monetary stimulus (BoJ has been buying assets at US$740 billion a year to drive down long-term interest rates). But underlying inflation is stuck at 0.5%. BoJ’s goal remains at keeping real interest rates (after inflation) as negative as possible, as long as the economy performs. OECD forecasts growth in Japan to be 1.2% in 2018 (1.7% in 2017); the same in 2019.

China and BRICS

Many emerging markets (EMs) are still enjoying momentum from 2017, but there is growing concern about rising debt and vulnerabilities to capital flight as interest rates in US rise. For those recently emerged from recession, viz. Russia, Brazil and South Africa, their urge to return to strong levels of activity remains sluggish.

China and India have fewer concerns for their immediate outlook. Still, they need to reform their economies to help raise living standards to catch up. The main challenges will be to execute particular reforms – not just to the financial system but also to SOEs and local governments, including getting rid of corruption.

China’s GDP rose 6.7% in 2Q’18, the slowest pace since 2016. Retail sales held up rather well as did exports. Still, measures to curb rampant borrowing are biting – investments in infrastructure and manufacturing by SOEs and local governments have since slackened. These efforts, in the midst of headwinds from abroad (especially protectionist tariffs), have led to downgrades in growth for the rest of the year. IMF now forecasts GDP growth in China to average 6.5% in 2018 (6.8% in 2017) and about the same in 2019.

Recent depreciation of China’s currency, the yuan, exposes crucial vulnerabilities within the world’s second-largest economy as it faces escalating trade tensions with the US. The currency posted its biggest ever monthly fall against US$ in June (3.4%) and has since lost more ground. This slide marks a departure for the currency often regarded as an anchor of stability for Asia and other EMs.

As Beijing assesses the options, it finds itself between a rock and a hard place because (i) People’s Bank of China (PBoC) intervention means selling its US dollar stash of reserves – which stood at US$3.11 trillion in June; (ii) it could instead raise domestic interest rates, thereby making the currency more attractive which might help to shore up the yuan. But it also risks weakening an already slowing Chinese economy just as the trans-Pacific trade war starts to bite; and (iii) it could impose stricter controls on China’s capital account which will likely spook overseas funds that have rushed into China’s domestic bond and equity markets this year at an unprecedented rate.

However, to internationalise the yuan, China has to keep fund flows relatively unencumbered. The PBoC has sensibly pledged to keep the RMB “generally stable.” In July, China implemented a mix of tax cuts and greater infrastructure spending citing growing uncertainties, as it ramps up efforts to stimulate demand to counteract a weakening economy.

As for India, I wrote extensively on what’s happening there (my July 2018 column: “India: Chugging Along but Needs More Firepower” refers).

What then are we to do

As I see it, China and China-India centred Asia is now the heart of the world economy. Their steady growth has been a source of stability in an otherwise unsteady world.

Of late, developments in China received more scrutiny than usual because of the context: Chinese stock market has since fallen into bear territory, and a growing trade dispute with the world’s largest economy, US. Despite China’s astonishingly sustained expansion, the economy is widely considered vulnerable because growth in output has been underwritten by an even faster increase in debt.

The nation’s gross debt – both public and private – is now estimated at over 250% of GDP. The worry is not just the volume of debt but its quality. China’s domestic policies encourage high savings.

Those savings, held in banks, have been funneled to companies, especially SOEs. The credit quality of the loans is hard to assess but is likely to be uneven. China has since begun to slowly tighten the credit taps, with even tighter rules on shadow banking and more scrutiny for both local government financing and public-private investment projects.

At the same time, a sharp increase in the number of defaults by corporate issuers has revived anxieties about Chinese debt. In my view, it is the tighter credit conditions and defaults, rather than worries about a trade war, that best explain the recent 22% decline in the Shanghai Composite index from its January highs.

Tightening credit policy is also a compelling explanation for the weak macro-economics. Credit growth fell, and growth in fixed investment followed. This appears to be having some effect on consumer sentiment as well.

No doubt, Trump’s tariffs on US$50bil of Chinese imports (and threatens US$200bil more) will have a direct (but unlikely to be catastrophic) impact on growth. But China is now an investment-led rather than an export-led economy.

Still, it is the knock-on effects that are most feared. If the escalation of hostilities leads to a reduction in foreign direct investment in China, the long-term impact could be significant. True, China may be facing a delicate moment economically.

But given China’s deepening role in the world economy, any pain that the US manages to inflict on it would be quickly shared with the US and the broader world – at a moment when Europe’s economy is slowing, and many EMs looking unstable.

On the whole, China’s economy will remain strong and resilient. Whatever happens, I think this won’t change the Chinese situation much.

By Lin See-yan – what are we to do?

Former banker Tan Sri Lin See-Yan is the author of The Global Economy in  Turbulent Times (Wiley, 2015) and Turbulence in Trying Times (Pearson, 2017). Feedback is most welcome.

 

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for a One World Global Government under a New World Order. http://jimdukeperspective.com/1526-globalagend/

 

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Why is Bitcoin price going down again? – Global Coin Report

 

The Bitcoin Price Is Tanking — Here’s Why – Forbes

 

The Bitcoin Price Is Down 50% This Year Alone — Here’s Why – Forbes

 

Bitcoin’s Bad Year Keeps Getting Worse. Down 70% From High | Fortune

 

Bitcoin ‘On a One-way Street Going Down’ Says Futures Trader …

 

 PressReader – The Star : Rethinking Social progress in the 21st century