INDIA’S SLOWDOWN

INDIA’S ECONOMY GROWS SLOWEST SINCE 2009 AS FASTEST BRIC INFLATION BITES

Kartik Goyal

Bloomberg, November 30, 2011

India’s economy grew last quarter at the slowest pace in more than two years after the nation’s central bank raised interest rates by a record to tame the fastest inflation among so-called BRIC nations.

Gross domestic product rose 6.9 percent in the three months through September, the Central Statistical Office said in a statement in New Delhi today. That’s the weakest expansion since the second quarter of 2009, and matches the median of 6.9 percent in a Bloomberg News survey of 24 economists.

Prime Minister Manmohan Singh’s efforts to stimulate growth are being hamstrung by corruption scandals that have stalled legislation for a year, and political outcry against foreign investment in retail. The Reserve Bank of India has also been constrained in supporting the economy as it struggles with inflation that’s almost twice the rate in China and higher than in Brazil and Russia.

“High interest rates, uncertainty about reforms, allegations of corruption and recessionary global conditions are casting a deep shadow over India’s growth story,” said Rohini Malkani, a Mumbai-based economist at Citigroup Inc. “What is worrying is that growth prospects do not seem sunny for the next year either.”

Citigroup this week cut its estimate for the Indian economy’s expansion to 7.1 percent for the year ending March 31 from 7.6 percent earlier.

(...) [artículo aquí]

CHINA’S SOFT POWER GAP

A CHINESE CENTURY? NOT QUITE

Tom Doctoroff

The Hufftington Post, November 29, 2011

In the narrowest sense, a superpower has the military might to force the world to acquiesce to hegemonic resolve (for example, the Soviet Union). Then there are economic superpowers that influence capital flows and global growth rates. When they struggle, the world does too. Finally, there are soft superpowers, nations that "own" universal values.

American strengths and weaknesses. In response to the brouhaha over the American debt ceiling, a correspondent for the German newspaper Die Welt wrote in July, 2011: "Out of the American twenty-first-century crisis could come the downfall of the dominant power of the twentieth century." His sentiments, perhaps overheated, are a reminder that nothing lasts forever. It is to be hoped that America's disorientation, triggered by the rise of China, political polarization, and a hangover of material self-indulgence, is not permanent. Even if GDP growth slows due to protracted deleveraging, the combination of a growing population and high per capita income ensures continued economic sway. America's military budget, currently eight times that of China, will continue to underpin geopolitical clout, even as the country's status of as an 800-pound gorilla diminishes in a multi-polar world.

American values -- as opposed to its political system -- will have global appeal for generations. Individualism -- the encouragement of society to define oneself independent of society -- does not travel well, but respect for the dignity of the common man touches all hearts. Iconic American brands such as Nike and Coke, vessels of hope, will never go out of style. American pop culture will not be challenged. Superstars -- from Lady Gaga to Michael Jackson to Angelina Jolie to Johnny Depp -- epitomize self-actualization, an aspiration that transcends culture.

(...) [artículo aquí]

A COLLAPSE IN CHINA?

PREDICTIONS OF AN ECONOMIC COLLAPSE IN CHINA ARE IN VOGUE

Once-unbridled optimism is giving way to fears that slowing GDP growth, rising public debt and stubbornly high inflation are signs of bigger problems to come.

David Pierson

Los Angeles Times, November 28, 2011

Not long ago, those who predicted that China's economy was headed for a fall were in a lonely place.
U.S. economist Nouriel Roubini, widely praised for calling the U.S. housing meltdown, was dismissed as a serial contrarian when it came to his pessimistic China views. So was well-known hedge fund manager Jim Chanos. Lawyer and author Gordon Chang was derided as a Chicken Little for his 2006 book "The Coming Collapse of China."

Suddenly they're all Nostradamus.

Backed by data showing a slowdown in the world's second-largest economy, doomsayers have taken center stage. Unbridled optimism has given way to fears over widening cracks in the Chinese economic miracle.

The gloomy sentiment has spilled into financial markets, whose investors have been running for the exits.

The Hang Seng China Enterprises Index, which tracks the stock performance of major mainland companies listed in Hong Kong, is down 26% so far this year, making it the worst-performing market gauge in Asia.

The practice of short-selling — betting that a stock will fall in value — has become so pervasive among traders of Chinese equities that analysts at French banking firm Societe Generale deemed China the "world's most crowded short." For instance, nearly a third of the shares of China Overseas Land & Investment Ltd. were shorted in August and September, signaling doubts about the prospects of China's largest property developer.

"There's growing sentiment that the Chinese story doesn't make sense," said Chang, who is now invited to investor conferences and remains convinced of a looming crash.

Bears like Chang see slowing GDP growth, rising public debt and stubbornly high inflation as evidence China's problems are about to get bigger.

Skepticism runs especially deep when it comes to real estate, which represents about a fifth of China's economic output, by some estimates. In a pattern eerily similar to the U.S. housing boom, easy financing in recent years unleashed a Chinese development frenzy that sent prices soaring. Eager home buyers camped out for the chance to buy into planned developments, sight unseen. The typical 1,000-square-foot apartment in Shanghai costs $335,000, about 45 times the average resident's annual salary.

Now China's housing bubble is deflating. Home prices reversed in October for the second consecutive month as cash-strapped developers became desperate to unload homes. An index of 35 major cities showed 29 had experienced a decline in sales from a year ago; sales plunged more than 50% in six of them, including Beijing.

The Chinese government says it's all part of the plan. After loosening the credit spigot during the financial crisis to keep the economy humming, it's now tightening lending and clamping down on speculators.

(...) [artículo aquí]

WEI QI VS CHESS

CAN INDIA BEAT CHINA AT ITS OWN GAME?

Aditya Kaul

DNA, November 27, 2011

The Chinese play a game called Wei qi. It is like chess, but with a different philosophy. While a chess player seeks absolute victory by checkmating the opponent’s king, a Wei qi player seeks a strategic edge by encircling the opponent’s pieces. In chess, you have the advantage of knowing the placement of all your opponent’s pieces. But, in Wei qi, strategy unfolds gradually. Pieces are deployed as the game progresses.

In making the comparison between the two strategy games in his recent work, On China, former US secretary of state Henry Kissinger traces the origins of China’s “distinctive military theory” to a period of upheaval, when ruthless struggles between rival kingdoms decimated China’s population.

Reacting to this slaughter, Chinese thinkers, he says, developed strategic thought that placed a premium on “victory through psychological advantage” and “preached the avoidance of direct conflict.” What makes China’s case more of an enigma is that it still invokes its millennia old strategic principles in its dealings with the modern world, and fiercely adheres to them.

Wei qi originated in China, and chess in India. As chants for an India-China ‘showdown’ grow louder, a senior Indian diplomat cautions that “nobody has a good understanding of China.”

Global power

The two sides were expected to sit across the table from Monday in New Delhi for the 15th time for Special Representatives’ talks on the border dispute, but there has been a last minute postponement and new dates are yet to be announced. Last year too, India had suspended the talks after China denied a visa to Northern Army Commander Lt Gen BS Jaswal because he came from the “sensitive” J&K, which China considers “disputed territory”, a pro-Pakistan shift from its earlier stand that J&K is an India-Pakistan bilateral dispute.

Outwardly, there appears little movement between Beijing and New Delhi. “China’s primary objective,” says former national security advisor, Brajesh Mishra, “is to have no rival in Asia. Otherwise, how can they claim to be a global power of the standing of the United States?”

(...) [artículo aquí]

CHINA’S LANDING

CHINA’S ECONOMY: SOFT LANDING, HARD LANDING OR CRASH LANDING?

Shae Smith

Money Morning, November 26, 2011 

There’s no escaping the Eurozone crisis. It even managed to keep China away from the headlines. However, in recent days China’s economy has fought its way back to the front page.

Why?

Because China’s about to lose its biggest export market.

As the Euro crisis grows, European consumption is rapidly falling. Meaning China will be hit where it hurts… their manufacturing sector.

Which also means… China’s soft landing could now be China’s hard landing …moving into a devastating crash landing.

According to Bloomberg News, ‘China’s exports rose at the slowest pace in almost two years in October as Europe’s deepening debt crisis crimped demand.’

Crimped demand? Demand from Europe has tanked since August.

In August, export growth was a robust 22.3%. Less than a month later, it had tumbled to a tiny 9.8% (that’s tiny for China).

And there’s worse to come. Lu Ting an economist with Bank of America says export growth will fall further.

In total, Ting believes export growth to Europe could be just 10%… for the whole of 2012.

(...) [artículo aquí]

JAPAN’S CONTAGION RISK

EUROPE DEBT CRISIS POSES GRAVE RISK TO JAPAN, SAYS FURUKAWA

Mitsuro Obe

The Australian, November 25, 2011

The Japanese government today said it is prepared for any contingencies that may result from the widening sovereign debt crisis in Europe, and is in lockstep with the Bank of Japan in dealing with potential contagion risks.

"The recent spread of credit woes to Italy poses a grave risk to the Japanese economy," said economic and fiscal policy minister Motohisa Furukawa in a press conference. "The government and the Bank of Japan share strong concerns and have agreed to work closely with each other."

The statement came after the Cabinet Office yesterday disclosed that Japan's financial institutions have the most exposure to Italian sovereign debt among foreign banks after those of France and Germany.

The government and the BoJ are studying how the crisis could play out and how they should respond, according to a Cabinet Office official. "They are also exchanging information to stay ahead of the curve," the official said in an attempt to reassure financial markets about Japan's ability to handle such a crisis. The official noted that after the financial crisis that began in the US in 2008, Japan swiftly enacted economic stimulus measures with the support of massive liquidity injections from the BoJ.

The statement was adopted in a meeting of senior government and BoJ officials today to review the progress of measures to cope with the strong yen that were introduced last month.

In the meeting, Deputy BoJ Governor Hirohide Yamaguchi noted that "the crisis of confidence has reached major economies of Europe and has caused a failure in a bond auction in Germany", according to officials present at the meeting

(...) [artículo aquí]

CHINA’S FALTERING EXPORTS

CHINA'S LOPSIDED BALANCING ACT

John Lee

Business Spectator, November 24, 2011

Over the weekend the Chinese vice-premier, Wang Qishan, who is responsible for overseeing the country’s financial sector predicted that the global economy could slump into a long-term recession, and urged China to speed up reforms to cope with any possible fallout. Wang would have known ahead of time what the HSBC Purchasing Managers Index (PMI) revealed on Wednesday – namely the lowest recording of industrial activity over the month of November for almost three years. In response, the Australian all ordinaries index fell 1.86 per cent, while share prices for mining giants BHP Billiton and Rio Tinto fell 3.05 per cent and 3.41 per cent respectively.

Given that 23 cents in every dollar worth of our exports goes to China, the local sharemarket response is predictable. But Australian investors, who generally invest for the short- or medium-term, are getting it wrong and displaying a worrying lack of understanding as to how the Chinese political economy actually works. In fact, the data coming out of China over the past week ought to delight all but the longer-term investors in our big miners.

The November PMI figure of 48 indicates that industrial activity has actually shrunk since a figure of 50 represents stagnation. The index is derived from responses from surveys sent to around 400 executives of manufacturing companies. It is important to realise that the companies surveyed consist overwhelmingly of foreign-invested or foreign-owned export manufacturers in China. If we examine the PMI figures since 2004, the index’s correlation with the demand for Chinese exports in the major global consumer markets of the European Union and the United States is almost perfect. Therefore, the disappointing PMI figure for November tells us what we already know – that demand for Chinese exports in the industrialised world is faltering, especially in the EU.

(...) [artículo aquí]