• Current Reports  

    Published on September 4th, 2015

    For years I have felt like a lone voice in the wilderness, monitoring central bank reserves as an important determining factor of what I loosely call “international liquidity”. Suddenly I’ve got company. In the last few weeks everyone has been focusing on the topic, and “experts” by the dozen have penned reports about it. Naturally, I’ve read everything that has passed across my screen, and—sad to say—I’m appalled by the results: an egregious example of what you see and what you don’t see analysis...
    Published on September 4th, 2015

    Today we present an offering from our China service, Gavekal Dragonomics. Just what is China’s government up to? Investor confidence in the Chinese government has taken a beating after its botched interventions in the stock market and the poorly-handled change to the exchange-rate regime. The structural reforms promised by the government two years have also been slow in appearing. In this chartbook, adapted from a presentation to our clients in Singapore this week, Andrew explains how the nationalist politics of Xi Jinping’s government are affecting economic reform. The key point is to understand that China’s leaders are not far-sighted planners calmly executing a long-term strategy, but politicians responding to events and seizing opportunities where they can find them. Economic reform...
    Published on September 4th, 2015

    Just what is China’s government up to? Investor confidence in the Chinese government has taken a beating after its botched interventions in the stock market and the poorly-handled change to the exchange-rate regime. The structural reforms promised by the government two years have also been slow in appearing. In this chartbook, adapted from a presentation to our clients in Singapore this week, Andrew explains how the nationalist politics of Xi Jinping’s government are affecting economic reform. The key point is to understand that China’s leaders are not far-sighted planners calmly executing a long-term strategy, but politicians responding to events and seizing opportunities where they can find them. Economic reform in China is not going in reverse, but it is scattershot and opportunistic—a style that...
    Published on September 3rd, 2015

    Predictions of the German export machine’s demise followed southern Europe’s 2011 slide into deflation, the yen’s 2012/2013 devaluation, and now the emerging world’s slowdown. And yet German exports hit a new high in 2Q15 and the latest IFO survey points to more strength in 3Q. Far from going kaputt, German exporters can likely handle an emerging world crunch due to their geographical diversification, the benefit of a weak euro and improving European demand. Where Germany may suffer fallout from the likes of China and Brazil is via a deflation of animal spirits—this was its experience last year when sanctions were imposed on Russia...
    Published on September 3rd, 2015

    China is today holding a vast military parade to celebrate victory over Japan 70 years ago. As we send this note, 12,000 soldiers are on the march through Beijing, accompanied by ballistic missiles, helicopter gunships, bombers and fighter jets. This awesome display of power will be lapped up by a patriotic nation that revels in shows of national strength. Yet, aside from Vladimir Putin, no prominent global leaders accepted China’s invitation to attend. Unlike the US, China has few allies and even fewer genuine friends. And far from winning new friends, today’s military chest-thumping is only likely to scare China’s neighbors into the arms of the US...
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