Five paths for China – none of them look good

The what-will-happen-to-China’s-economy debate seems a bit stale these days.  

So thanks are due to Michael Pettis,  a professor of finance at Peking University’s Guanghua School of Management, for coming up with one of the more plausible models of the Chinese economy.

His insight is in his analysis of the relationship between the private and state sectors.  And it seems a little more convincing than the far-seeing technocratic genius stuff so attractive to international bureaucrats and journalists.

China’s rise – delayed again

The unstoppable march of China continues, according to Insider.com (and in turn according to Chinese scientists).  China’s latest satellite can take pictures at a resolution which eludes US satellites. 

Subtext: start learning Mandarin – now!

But you might be better employed seeking out stuff like the latest from George Magnus, a quirky former financier, writing in the Guardian – no less.

Which is bigger: the risk to China’s property market; or to the CCP’s reputation?

China’s central bank turned on the monetary taps, after property company Evergrande (dubbed the world’s most indebted developer) announced further difficulties in meeting its obligations.  The beleaguered company’s share price and credit rating plumbed new depths.

The company also informed the world that state representatives had taken a majority of seats on a new risk management committee.

South Korea as the global exemplar? Think about it

Self criticism is a Good Thing.  It’s usually kinder than the external version, and you get a chance to revise your argument.

So what to make of the mea culpa in the Financial Times from Jim O’Neill – the man self-credited with coining the BRIC (Brazil, Russia, India and China) acronym back in 2001.  Does he succeed in his mea recta?

Back then he argued that:

“since these countries were likely to continue their striking gross domestic product growth over the next decade, we urgently needed them to play a bigger role in global governance.”

Trouble on the North West frontier

It was back in 1982, when then-President Ronald Reagan said “freedom and democracy will leave Marxism and Leninism on the ash heap of history”.

Remind me again when that stopped being policy.

Certainly, there was a case for soft-pedalling the rhetoric and crossing fingers when Deng Xiaoping’s China was obediently joining the world economy and making pacific agreements on Hong Kong.

It will be a good day when Judith Curry is better known than Greta Thunberg

The world climate revival meeting in Glasgow ended with Alok Sharma (the UK’s minister to COP26, as well as the presiding chief priest) in tears over a last minute word change.  The countries which have built more coal fired capacity, more quickly, than just about anyone else in history (that’s you China and India) would only agree to phase its use “down”, rather than “out”.

Despite the (quite literal) imprecations of hellfire, the only truly substantive outcome of the conference may be the Chinese government’s practical suggestion that the world should aim for a global temperature increase of 2°.  (Bill Gates also chipped in some climate realism, noting that 1.5° was probably unachievable.)

Planes, trains and automobiles – and also by foot, sail, cycle – and metal ball

So COP26 kicked off in Glasgow during the weekend. But it’s hard to get too enthused about an international jamboree if you’ve been involved in organising one. 

The striving by the in-group to pre-cook an outcome which can be pitched as ‘successful’; the breathless blow-by-blow media coverage; the travelling circus of groupies, civil society and protesters.  The Times reports on those making the pilgrimage to Scotland’s famously tough city, including “a Greek actor … on the final leg of a 2,000-mile run from Athens to Glasgow”. Which certainly sounds more attractive than the journey from Germany in a “human-sized hamster ball” – although the latter may have protection and shelter benefits.

The Covid mystery deepens … or so we are told

Accuracy is important for the BBC.  Hence the straplines in its reporting yesterday on the origins of Covid-19 in Wuhan, China:

“Covid origins may never be known – US intelligence”

“But US agencies say the virus, first identified in China, was not developed as a biological weapon.”

“The office that oversees US spy agencies could not establish how the coronavirus pandemic began.”

But the Financial Times thought the same material merited a different angle:

Correction: Britain’s gas crisis means Europe’s gas crisis

Remember the 1970s?  We were going to run out of oil and everything revolved around energy prices.

America got into wars because of it and built an enormous strategic stockpile; NZ had carless days and the hydrocarbon developments of Think Big, the last of the great state-directed development projects (well … until the renewables project, national fibre broadband and the distortions of the Resource Management Act that is).

Europe’s natural gas crisis has the potential to head in a similarly dominating direction.

China’s problems in property are a difficulty for everyone

As China’s most indebted property developer Evergrande hovers on the brink, the question is where the government will draw the line on support for the firm – and for the financial system.

Markets are nervous but the consensus seems to be that while an example may be made of Evergrande, the damage should be contained there.

But the Financial Times’s Gillian Tett (an insightful chronicler of the 2008 global financial crisis) sees the issue as more fundamental:

“… what is the pillar of faith on which asset values rest? Is it government support? Or is it the independent scrutiny of accounts by investors? Does either pillar work?”