• Current Reports  

    Published on March 5th, 2015

    By lowering its target for China’s GDP growth to around 7% for 2015 from about 7.5% during the past three years, the leadership is finally bowing to the reality of a permanent economic slowdown. This is a good thing: it means less political pressure to build up debt and run polluting factories in pursuit of an unrealistic growth target. And in fact, for the past half-year or so the propaganda apparatus has been trumpeting slower growth as a virtue, under the slogan of “adapting to the new normal.” But how far have China’s famously growth-obsessed leaders really dialed back their expectations? We fear not quite enough. While China can probably manage growth of near (though likely somewhat below) 7% this year, a further slowdown in the coming years looks inevitable...
    Published on March 5th, 2015

    By lowering its target for China’s GDP growth to around 7% for 2015 from about 7.5% during the past three years, the leadership is finally bowing to the reality of a permanent economic slowdown. This is a good thing: it means less political pressure to build up debt and run polluting factories in pursuit of an unrealistic growth target. And in fact, for the past half-year or so the propaganda apparatus has been trumpeting slower growth as a virtue, under the slogan of “adapting to the new normal.” But how far have China’s famously growth-obsessed leaders really dialed back their expectations? We fear not quite enough. While China can probably manage growth of near (though likely somewhat below) 7% this year, a further slowdown in the coming years looks inevitable. The “new normal” slogan has some useful ambiguity, as it does not come with a growth number...
    Published on March 4th, 2015

    In China, political slogans matter. They help to set the agenda, acting as political weather vanes. In recent months, “One Belt, One Road” has become a signature slogan of Xi Jinping’s administration. A contraction of “Silk Road Economic Belt” and “21st Century Maritime Silk Road,” “One Belt, One Road” describes Beijing’s policy of financing and building transport infrastructure across Eurasia, the South China Sea and the Indian Ocean—aka the New Silk Road. As “One Belt, One Road” becomes a political mantra, investors are asking how they can benefit from Beijing’s ambitious plan to reshape regional trade...
    Published on March 4th, 2015

    In China, political slogans matter. They help to set the agenda, acting as political weather vanes. In recent months, “One Belt, One Road” has become a signature slogan of Xi Jinping’s administration. A contraction of “Silk Road Economic Belt” and “21st Century Maritime Silk Road,” “One Belt, One Road” describes Beijing’s policy of financing and building transport infrastructure across Eurasia, the South China Sea and the Indian Ocean—aka the New Silk Road. As “One Belt, One Road” becomes a political mantra, investors are asking how they can benefit from Beijing’s ambitious plan to reshape regional trade. One great hope is that China’s big engineering firms and makers of capital goods will find a lucrative new source of growth. As Beijing unleashes billions of dollars to build roads, railways and ports over its borders, state-owned construction and capital goods companies are best placed to benefit. The grand vision behind the New Silk Road initiative may be geopolitical...
    Published on March 4th, 2015

    Since the late 1980s, oil prices have only collapsed by -50% or more over a six month period on two occasions: during the 2008 crisis and in the period since last August. In itself, this begs some interesting questions: does the sudden drop in the WTI and Brent price mean that the world economy is falling apart? Or that oil is set to bounce back? Or finally, that oil was in a bubble which has now imploded? At this juncture, the first option seems to be a non-starter. Indeed, with most PMIs around the world above 50, with unemployment coming down almost everywhere, with wages starting to pick up in the US, with most large equity markets making new highs, and with US bond yields creeping back up, the world economy is clearly not imploding. This simple truth thus leaves us with two possibilities, namely that either oil prices were in a bubble which has now imploded, or oil is set to bounce back in the near future...