Daily Archives: Jul 2, 2014

Shanghai is leading a race to host the headquarters of a new “Brics” development bank. Jonathan Wheatley, deputy emerging markets editor, looks at what purpose a Brics bank would serve and whether the Brics acronym is still relevant today.

Vucic spreads his message of doom

Could Serbia become the Greece of the Danube and go bankrupt within a year, just as other European countries are having some success in grappling with their debt problems? That was the recent warning from Aleksandar Vucic, the country’s new prime minister, should his government fail to implement a package of tough economic reforms, including extensive privatisation and labour liberalisation.

Vucic’s doom-mongering is partly a signal to his electorate that there are hard times ahead. Serbia is indeed on a dangerously unsustainable trajectory. But it is not quite at the buffers yet. Read more

The nerdier parts of Washington DC have been riveted over the last week by a fight over one of the duller institutions in the city: the Exim Bank, the US’s export credit agency. The battle threatens the very existence, at least in its current form, of the agency that promotes US exports by insuring foreign buyers.

The battle is generally portrayed as a domestic ideological affair that pits true believers in unregulated markets (at least on this issue) against true believers in business. Yet the context inescapably includes other exporting economies, particularly in emerging markets. The stakes for the Exim Bank’s defenders have only been raised by the aggressive use of similar export credit agencies (ECAs) by emerging economies and most particularly China. It remains remarkable that the same US Congress that regularly inveighs against unfair Chinese export competition is also contemplating abolishing the agency that may help redress the balance.

 Read more

Najib Razak, Malaysia’s prime minister, is so pleased that his country’s currency, the ringgit, is at its strongest level since 2012 that he felt the need to tweet it on Wednesday.

He added that – insha-Allah, or God willing – the growth rate of the majority Muslim nation would “remain anchored by strong domestic demand”.

If a report just out by Moody’s Investors Service is correct, Malaysia will need all the help it can get to ensure it remains on a healthy growth trajectory, with such reliance on domestic demand. Read more

** FT News **

* Macau passes Switzerland in wealth tables | Chinese gamblers have helped catapult Macau past the central European country to become the world’s fourth wealthiest territory on a per-capita basis

* Peugeot inks fifth factory in China | Peugeot has been given clearance to build a plant in Chengdu, which will begin production in 2016 with the capacity to build 300,000 cars a year

* Xi’s Seoul visit leaves Pyongyang in the cold | China’s president will become the first Chinese leader to visit Seoul before Pyongyang, reflecting the transformation of Beijing’s stance towards the Korean peninsula Read more

For years, the big-picture, long-term story in the global economy has been that of convergence. The dates and metrics vary but not the broad forecast: if current trends hold, then, around the middle of this century, per capita incomes in emerging economies will ‘converge’ with those in the rich world. The result: A ‘middle class’ world and vast fortunes for all those clever enough to position themselves to take advantage. But the OECD is out today with two bits of research/futurology that make clear the picture is a lot more complicated than that. And convergence may not happen as fast as many expect. The message of the first (the hefty annual “Perspectives on Development”) is that, bar China, the “BRIICS” (the Brics plus Indonesia) are likely to fall well short of seeing their per capita incomes reach the average of OECD countries by 2050. Read more

By Qu Hongbin, Co-Head of Asian Economic Research, HSBC

For many, China’s growth model, which has delivered average annual GDP growth of 10 per cent over the past three decades, simply looks wrong: a national savings rate of around 50 per cent is unheard of in a large, modern economy.

A typical diagnosis states that China invests too much and consumes too little. The prescription is “rebalancing” – moving the economy away from investment towards consumption-led growth. However, a consumption-led growth model has little in theory or evidence to support it. Read more

** FT News **

* Video: Hong Kong march for democracy | Demonstrators demand universal suffrage

* Ukraine seeks EU help as talks fail | Fighting restarts between government forces and separatists in east of country after President Petro Poroshenko vows to retake territory Read more

Rosneft has raised the stakes in its campaign to strip Gazprom of its monopoly over Russian gas exports. In a sharply worded statement on Tuesday, Russia’s state oil company threatened to take Gazprom to court unless it opened up a planned pipeline to China to rival gas producers.

Gazprom has been gearing up to build the Power of Siberia pipeline since signing a $400bn gas export contract with China in May. Linking vast Gazprom controlled gas fields in east Siberia with the Russian Pacific, the 4,000km pipeline will feed gas to domestic consumers and to the Chinese border. Read more