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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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 Posted:
Dec 23, 2007 - 12:50 AM |
 
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| Post subject: China: A Recession in US Is Welcome for China |
Interesting article. I think this here makes a lot of sense. I see no chance of the rmb getting close to 6.
"The Chinese authorities – known for their hallmark gradualist approach in implementing reform programs – are very unlikely to make such a bold move as 20% appreciation in 2008."
China: A Recession in US Is Welcome for China
Qing Wang | Hong Kong
Chinese authorities have been employing a whole range of policy instruments in their attempt at cooling off the economy but have not been successful. However, we expect that this challenging task will be accomplished in 2008, reflecting ‘external aid’ – in the form of a mild US recession — rather than skillful macroeconomic management.
A great dichotomy. One day after our US economists Dick Berner and David Greenlaw called for a mild US recession, China posted the highest reading of CPI inflation in a decade: the headline CPI inflation reached 6.9%YoY in November. These latest developments highlight the great dichotomy for the Chinese economy entering into 2008: while China’s external environment is set to deteriorate significantly, the risks of out-of-control inflation and general economic overheating in the domestic economy is on the rise.
Four seasons in 2008. In view of the tremendous uncertainties about the outlook for China’s external demand and the domestic policy stance, we characterize potential scenarios for 2008 as four seasons of the year.
Autumn scenario for 2008 (60% probability) — an imported soft landing. We expect the Chinese economy to achieve a soft landing in 2008, aided primarily by a significant moderation in China’s export growth due to weak external demand. We therefore call it “an imported soft landing”.
First, concerns about the risk of overheating in 2008 are not unwarranted. Investment and exports have been the main drivers for growth in China. Since interest rates are still largely controlled at below market-clearing levels and the renminbi exchange rate remains substantially undervalued, these price signals tend not to constitute effective binding constraints for investment decisions in China. In this context, the investment cycle tends to reflect the macro policy stances, which are influenced heavily by the political cycle in China. Since the early 1990s, FAI growth rates have reached a peak every five years, and the year of peak growth rates happened to be the year of change of government. The next change of government is due to take place in March 2008. An acceleration of investment from the current levels — which are already deemed high — could easily drive the economy into overheating territory, in my view.
Second, moderation in China’s export growth due to weak external demand in 2008 should be a welcome development that would help the economy to achieve a soft landing. In my opinion, it is very challenging — if ever possible — to realize a policy-induced soft landing of the economy at the current juncture, given that Chinese authorities are pursuing multiple objectives but with limited policy tools. In particular, the effectiveness of both interest rate and exchange rate policies is seriously compromised by some objectives that do not have direct bearing on the macro-economy. In this context, a weakening external demand should serve as a healthy headwind and thus help slow the economy that is constantly on the verge of overheating.
Under the ‘imported soft landing’ scenario, we forecast China’s GDP growth to decline from 11.5% in 2007 to 10% in 2008 and CPI inflation from 4.5% to 4.0%. Our forecasts envisage a modest rebalancing in growth drivers in 2008: relatively weak exports to be offset by sustained strong domestic demand. Consequently, the current account surplus (in percent of GDP) will narrow, as import growth outpaces export growth, albeit both at lower levels.
Under the ‘imported soft landing’ in 2008, the policy outlook will likely feature a continued muddling through. The authorities’ current policy priorities are addressing the risks of overheating in general and entrenched inflation in particular. However, they may have to increasingly resort to administrative measures to achieve the intended policy effect. The welcome downturn in external demand and its attendant cooking-off effect should be able to provide a breathing period for the authorities and ease the urgency to take aggressive policy actions with blunt policy tools. We therefore expect a continued muddling through approach in policy implementation in 2008 featuring “three No’s”: no campaign-style administrative tightening, no large one-off revaluation of the Renminbi exchange rate, and no aggressive rate hikes.
Summer scenario (25% probability): Overheating. What if there is no meaningful external slowdown to import in the first place? If this is the case, the risk of overheating would, in my view, rise substantially. Under this scenario, we would expect China’s economic growth to remain robust, with exports still the main growth driver. The authorities are expected to continue muddling through in policy implementation with no major policy direction shift. In this context, investment growth will likely accelerate from the current high levels, as the political- cycle-driven investment cycle plays out fully.
Spring scenario (10% probability): Policy-induced soft landing. Here, we envisage that the authorities would seize the opportunity when the global economy is still delivering robust performance and take proactive measures to address the imbalances in the economy and cool off the economy from a position of strength. A much faster appreciation of the renminbi exchange rate should be the most important element of the policy package that could potentially bring about a soft landing when the global economic environment remains favorable. We estimate that a 20% appreciation of the renminbi under the Spring scenario, together with the secular softening in export growth, should be able to produce roughly the same magnitude of export growth decline as under the Autumn scenario. However, we attach a very low probability to this scenario. The Chinese authorities – known for their hallmark gradualist approach in implementing reform programs – are very unlikely to make such a bold move as 20% appreciation in 2008.
Winter scenario (5% probability): Outright hard landing. The winter scenario features a double-whammy impact on the Chinese economy: aggressive policy tightening chokes off domestic demand, exacerbating the impact of a global synchronized downturn and resulting in an outright hard landing of the economy. At first look, it appears the most likely scenario at the current juncture: while the risk of a US recession is looming large, the Chinese authorities have been very vocal lately in warning against the risk of overheating and inflation and vowed to take tough tightening measures to control rapid investment growth. We, however, attach the smallest probability, of only 5%, to this winter scenario. This is essentially a ‘gigantic policy mistake’ scenario.
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CoffeeHawk_0
Board Buddha
Joined: July 14, 2005
Posts: 14444
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Dec 23, 2007 - 08:21 AM |
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poser.
You post a lot of articles on international politics and economics, about some of the most complex issues and interactions on the planet. I have never read of you interpretting the articles, explaining the missing links, dissecting the facts, and making data driven predictions. There is also a lack of counter-arguments in your posts indicating you're not really studying the issues but only posting popular opinion, or at least the opinions that you find intuitively correct. Why? |
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sienna
Low Seater
Joined: July 17, 2006
Posts: 3440
Location: kiss my ass
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Dec 23, 2007 - 08:28 AM |
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^ I totally agree, was going to write the same thing, but not just concerning hc but also the other ppl, they copy lots of articles and put it here but they dont have anything to say about it, we already know those issues, what we are interested in is ppl's opinions and ideas for a solution!
anyhow, I really don't understand why USA recession would be a good thing for China, as if US' growth would decline a lot they would certainly not import as much goods from China, and US is one of China's biggest and most important customer, so that would be a big step-back for China's balance of payments |
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CoffeeHawk_0
Board Buddha
Joined: July 14, 2005
Posts: 14444
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Dec 23, 2007 - 08:36 AM |
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Andreas
Board Royalty
Joined: Feb 27, 2004
Posts: 6413
Location: 31 N 121 E
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Dec 23, 2007 - 11:11 AM |
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Yeah, from the China Daily. Are you TRYING to be daft or does it come naturally? |
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If it has tits, tires, or a transom, there's gonna be issues! |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 01:29 PM |
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"Are you TRYING to be daft or does it come naturally?"
He doesnt even have to try anymore. It comes automatically and naturally.
"I have never read of you interpretting (sic) the articles"
Haha. Go and search the articles I posted on this section. You are all pissed off because everyone made it so clear you are out of your depth in so many posts here lately. And now you post your "balanced view" from where? CHINA FKNG DAILY!!!! just like you posted "DEFINITIVE EVIDENCE" on Iran in an article full of "it's believed to", "it seems like" and "perhaps".
Dude, you are a gullible child!
Which part of this article do you want me to dissect? I completely agree with it. The RMB floated very slowly from 8,28 5 years ago to 7.4 and it will not go to 6 in one year like everyone is suggesting and how has been discussed here before. End of story. Am I a poser from trying to educate you? I'm fine with that, I am a poser then.
siena, first you wrote this:
"^ I totally agree, was going to write the same thing, but not just concerning hc but also the other ppl, they copy lots of articles and put it here but they dont have anything to say about it, we already know those issues, what we are interested in is ppl's opinions and ideas for a solution!"
And then this:
anyhow, I really don't understand why USA recession would be a good thing for China, as if US' growth would decline a lot they would certainly not import as much goods from China, and US is one of China's biggest and most important customer, so that would be a big step-back for China's balance of payments
You clearly failed to understand the article AT ALL, and you are the one saying you "already know it". No you DO NOT KNOW IT, otherwise you would not post the second part of your post.
Now re-read this:
"Second, moderation in China’s export growth due to weak external demand in 2008 should be a welcome development that would help the economy to achieve a soft landing. In my opinion, it is very challenging — if ever possible — to realize a policy-induced soft landing of the economy at the current juncture, given that Chinese authorities are pursuing multiple objectives but with limited policy tools. In particular, the effectiveness of both interest rate and exchange rate policies is seriously compromised by some objectives that do not have direct bearing on the macro-economy. In this context, a weakening external demand should serve as a healthy headwind and thus help slow the economy that is constantly on the verge of overheating. "
And try to understand China is in a VERY delicate situation regarding inflation, specially in areas that weigh A LOT in their CPI (that's consumer price index), like food!
You and coffee are hopeless, completely hopeless. I share insights from the best minds in the world and all you have to say is "you dont analyze it". Morons. Idiots. If you had any intellectual density you would say "Thanks for sharing" and that's it.
Hopeless. |
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TheMasterofDisaster
SuperStar
Joined: Aug 31, 2007
Posts: 1355
Status: Offline
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Dec 23, 2007 - 01:32 PM |
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"I share insights from the best minds in the world"
cheers |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 01:35 PM |
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CoffeeHawk_0
Board Buddha
Joined: July 14, 2005
Posts: 14444
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Dec 23, 2007 - 03:29 PM |
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^all you do is post one sided views, that are not of your own creation and research.
As far at the chinadaily article goes, he made a prediction about the future and it was true (the article is dated 2005). If a simple business person like you can copy someone else's thoughts I'm sure chinadaily could too. |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 04:08 PM |
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^ Well ok then.
I presume YOU post multiple sided views, but HC cant. Is that right? Article came from Morgan Stanley, by the way.
In case you havent noticed, and you havent, this same article is a PREDICTION for 2008 and breaks it down in 4 different scenarios including the reasoning for such backed up by facts and experience.
Business person? I am an English teacher that posts drunk and high, forgot?
Now I am a "simple business person"?
I could talk about my previous job here, market research, business planning for 2010, etc, etc, but I wont. Let's keep you ignorant and guessing about why I post what and how I do.
You are just pissed off because Tiger, Andreas, myself and a bunch of other people schooled you like a little girl for some time now, and you dont have density to argue. That's the "poser" thing that you tried to fly.
Hint: dont take it personally, LEARN. |
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Click here to read the latest retarded PM Natalie sent me. Let's make her lose face and FINALLY leave this site.
Last edited by hc on Dec 23, 2007 - 04:54 PM; edited 1 time in total |
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CoffeeHawk_0
Board Buddha
Joined: July 14, 2005
Posts: 14444
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Dec 23, 2007 - 04:51 PM |
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what have I been schooled in?
What I know above all else is that there are at least 2 sides to any situation and the truth lies somnewhere in the middle, and an expat forum is not likely to be better informed than Japan or any other member of the G8. |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 04:54 PM |
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CoffeeHawk_0
Board Buddha
Joined: July 14, 2005
Posts: 14444
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Dec 23, 2007 - 05:01 PM |
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I'll try being nicer if you'll try being smarter. |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 05:05 PM |
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CoffeeHawk_0
Board Buddha
Joined: July 14, 2005
Posts: 14444
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Dec 23, 2007 - 05:35 PM |
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I am a PBS mind in an MTV world. |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 05:39 PM |
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Kiwi
Post Boaster
Joined: May 07, 2003
Posts: 4763
Status: Offline
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Dec 23, 2007 - 05:44 PM |
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| sienna wrote: |
| ^ I totally agree, was going to write the same thing, but not just concerning hc but also the other ppl, they copy lots of articles and put it here but they dont have anything to say about it, we already know those issues, what we are interested in is ppl's opinions and ideas for a solution! |
Sienna for president! |
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[offensive signature removed by ADMIN] |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 05:48 PM |
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BS
Reacher
Joined: Sep 12, 2007
Posts: 238
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Dec 23, 2007 - 06:48 PM |
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| hc wrote: |
| "Thanks for sharing" and that's it. |
Thanks for sharing HC! |
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sienna
Low Seater
Joined: July 17, 2006
Posts: 3440
Location: kiss my ass
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Dec 23, 2007 - 07:22 PM |
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sorry hc, but I didn't read the article. but the topic seemed very interesting so i was disappointed to see that you just shared an article to us, it would be more fun if you had summarized it and told us your ideas and opinion about the article.
I have 40 pages to analyze for one seminar, so don't really want to read another article about economics now when it's Christmas. |
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<-- a different girly Shanghai blog |
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hc
Post Roaster
Joined: Apr 04, 2007
Posts: 4545
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Dec 23, 2007 - 08:36 PM |
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well siena I cannot do the interpretation and thinking for you, that should be done by each one of us. the good thing of reading this kind of article from a major economic powerhouse (morgan stanley) is that you can dissect how their thinking is done. this article is a great example of how to concisely explain a situation, it's consequences and the reasons they might or might not happen. it's excellent. nothing i could ever say would be better than what they said, so i thought about sharing the wealth with everyone. i could pull a wolfy and cite the article like if it was my own, but i chose not to as everyone should benefit from free info and access to great sources.
anyway. happy xmas every one. i wont bug you with any more articles. i will let china daily do the talking from now on, so that even coffeehawk can share his "ideas". |
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Click here to read the latest retarded PM Natalie sent me. Let's make her lose face and FINALLY leave this site.
Last edited by hc on Dec 24, 2007 - 03:56 PM; edited 1 time in total |
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dsugg
Barker
Joined: Nov 18, 2007
Posts: 186
Location: Shanghai or Toronto
Status: Offline
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Dec 24, 2007 - 03:18 PM |
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Hey - I found the article interesting, but maybe you should have added a comment at the bottom to indicate a direction for discussion. Interesting point - a soft landing with 10% gdp growth. I think the rmb has pent up demand to take it to 6, just a matter of when. And - not sure why a boring subject like economics would get you two guys so pissed. |
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leidelaohu
Wonder Wit
Joined: June 11, 2007
Posts: 3781
Status: Offline
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Dec 24, 2007 - 05:33 PM |
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| dsugg wrote: |
| I think the rmb has pent up demand to take it to 6, just a matter of when. |
That would actually be great for the US. Have some doubts tho that China really wants that gazillion dollars' worth of bonds to drop so low ? |
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Nathalie25
Board Legend
Joined: Aug 24, 2004
Posts: 10387
Location: Shanghai
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Dec 26, 2007 - 11:13 AM |
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to talk about some problems of chinese economics and financials and the way of how solve it, it is not so bad, but the actually, we people never really understand the reall shell of that by ourselves, and the prombles or hardship or even troubles of the politics and economics or finanicials of all world countries are totally very similar or almost same, so needn't waste it on time when we people have no powers to deal with~~~~~~~~~ |
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功高盖主，必有祸出。人生是人类生命中内心和万般经历的真实写照。 http:/
Last edited by Nathalie25 on Dec 26, 2007 - 11:16 AM; edited 1 time in total |
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Nathalie25
Board Legend
Joined: Aug 24, 2004
Posts: 10387
Location: Shanghai
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Dec 26, 2007 - 11:15 AM |
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we simple or even poor citizen of this world is hard to get the acquisition of control on the business or economics/financials~~~~~~ |
_________________
功高盖主，必有祸出。人生是人类生命中内心和万般经历的真实写照。 http:/ |
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