You don’t hear much these days about capital outflows from China. The renminbi seems well behaved, and China’s foreign exchange reserves have stayed stable in the past couple of months. Sure, the economy itself faces a bunch of challenges, as the government hasn’t quite found a way to maintain rapid growth rates without a dangerous degree of reliance on credit. But you don’t get the sense that the Chinese are falling over themselves in a rush to buy dollars.
The Fed might take heart from this. On two occasions in the past year, the US Federal Reserve’s intentions to raise interest rates have been confounded by financial turbulence caused by large outflows from China. The first was last summer, when the Fed was forced to postpone rate hikes following a surge in flows from China after the People’s Bank of China (PBoC) introduced a new regime for fixing the renminbi on August 11th. The second was this winter, when another surge in outflows that coincided with the Fed’s December rate hike made it impossible for the Fed to keep doing so. Read more
Capacity utilisation (CU%) in the chemical industry has long been the best leading indicator for the global economy. The IMF’s recent downward revision of its global GDP forecast is further confirmation of the CU%’s predictive power. As the first chart shows, the CU% went into a renewed decline last October, negating hopes that output might have stabilised. March shows it at a new low for the cycle at just 80.1 per cent, according to American Chemistry Council (ACC) data. By comparison, the CU% averaged 91.3 per cent during the baby boomer-led economic supercycle from 1987 to 2008.
This ability to outperform conventional economic models is based on the industry’s long history and wide variety of end-uses. It touches almost every part of the global economy, enabling it to provide invaluable insight on an almost real-time basis along all the key value chains – covering upstream markets such as energy and commodities through to downstream end-users in the auto, housing and electronics sectors. Read more
Bitter experience in Europe tells us that trivialisations of painful historical events, especially if they come from leading political figures, can inspire thinking among electorates that eventually turns into self-fulfilling prophecies. That is exactly why numerous countries in western Europe have laws that prohibit and reprimand any trivialising comparisons with the heinous doings of the axis powers in the 1930s and 1940s that caused the loss of millions of lives and unspeakable suffering. So unspeakable, that most of our ancestors preferred not to share those experiences with their descendants to this very day…
That makes recent historical comparisons by two former mayors of London all the more serious and outright unacceptable to all those who were persecuted and sacrificed their lives in the past century and to those who were dedicated to building a new and “peaceful” European Union. The United Kingdom has been an integral and vital part of that process in the past century, including since it joined the EEC in 1973 and decided by referendum in 1975 to remain in the body that was originally formed in 1952 to secure peace on a continent soured by thousands of years of war. Read more
In 1987, when I was five months pregnant with my youngest child Uchechi, doctors told me they were concerned that his head was not growing fast enough. It was one of the most frightening moments of my life. I couldn’t bear it, the sense of powerlessness in being able to do nothing but wait. It took two long months of fortnightly sonograms before we were finally given the all clear. Although Uchechi was fine in the end, the terrifying experience will remain with us forever.
Today, nearly three decades later, my heart goes out to the hundreds of thousands of pregnant women in Zika-infested countries who are going through the same agonising experience of not knowing the fate of their unborn child, or even worse those with confirmed cases of microcephaly. As world leaders, policymakers and young people come together in Copenhagen this week to discuss health, rights and well-being of women and girls as part of this year’s Women Deliver global conference, this epidemic is a reminder that a gender gap exists in health as well as education, economics and politics. Read more
for the FT's free emerging markets morning email briefings.
Select beyondbrics London
or beyondbrics New York
when you sign up here
The travel industry has seen impressive growth in recent years as business travel recovers post-recession and rapidly growing middle classes from emerging markets have sparked an aviation boom. But despite the growth of low-cost mass-market travel, higher-yield premium and luxury trips are outpacing the market as a whole.
Our latest report, ‘Shaping the Future of Luxury Travel’, which is underpinned by data modeling from Tourism Economics, found that luxury travel had a global growth rate of 4.5 per cent between 2011 and 2015, 0.3 percentage points higher than the overall industry. Over the next decade, luxury travel’s growth rate is forecast to accelerate to 6.2 per cent, compared with a (still healthy) 4.8 per cent for the overall market. Read more
The debate on the future of Europe and Britain within it is heating up. This week, Boris Johnson highlighted the problems with “EU foreign policy-making on the hoof”, suggesting that it had contributed to the protracted conflict in Ukraine. He was quickly branded a “Putin apologist” by adversaries.
None of Boris’s critics seem to have noticed that this is a clear case of shooting the messenger. What Boris has done is raise a legitimate concern. He is giving Europe a long-overdue reminder that in order to survive, it needs to get stronger. Read more
By Michelle Chan, VP of Programs, Friends of the Earth US
As chair of this year’s G20, China is mounting an ambitious campaign to promote ways that the banking sector can not only green the Chinese economy, but the global economy too.
Over the past decade, China has prioritised sustainable finance policies as a means of preventing and controlling pollution via its banking sector, leading many to hope that China can lead the world on a greener path towards sustainable finance. The members of the G20 Green Finance Study Group, meeting next month in Xiamen, are certainly betting that China does have something to offer when it comes to green finance.
But have such Chinese finance policies actually led to concrete improvements for the environment? Read more
Last December, as part of their contribution to the Paris climate talks, a coalition of African governments and the African Union set a hugely ambitious goal to deploy 300 gigawatts of renewable energy by 2030.
That’s roughly the equivalent of Japan’s entire electricity capacity and nearly a third of that of the US, in a continent where hundreds of millions of people currently lack access to power. It will require an average annual deployment rate of 17 GW. Sub-Saharan Africa’s biggest annual deployment to date has been 2.6 GW. So, the 2030 goal means increasing yearly net capacity additions by a whopping 650 per cent. Read more
From Africa to the Far East, countries aiming to recover assets embezzled by former leaders and officials are facing a raft of challenges.
Nigeria’s President Muhammadu Buhari , attending an anti-corruption conference in London today, waved aside any call for an apology over UK prime minister David Cameron’s “fantastically corrupt” remark. Instead, he asked for help in recovering funds held in the UK. He summed up the challenge thus: “Unfortunately, repatriating stolen assets is tedious, time-consuming [and] costly. It entails more than just signing of bilateral agreements.” Read more
Women and girls bear the brunt of the world’s disease burden because, in too many places, they don’t have the tools—or the rights—to protect their own health.
We know that healthy women and girls create measurably healthier and more productive communities. A recent analysis by the McKinsey Global Institute estimates that advancing gender equality could add $12tn to global GDP by 2025. That’s $12tn with a “t.”
When 10 per cent more girls are healthy enough to go to school, a country’s GDP increases by about 3 per cent. Healthy girls and women learn more, earn more, produce more, and raise healthier children. Read more
Brazil’s economy and politics have long been playing with fire. Now the rest of the world risks getting burnt by waiting for the crisis to be addressed domestically. The country could learn a lot from Spain’s 2012 rescue package from the International Monetary Fund.
Brazil’s is one of the largest emerging market economies, close to the size of Germany’s. Its GDP is $3.2tn in purchasing power parity terms. It is the largest economy in South America, with huge knock-on effects on other countries in the region. It is also very financially open, making up nearly 7 per cent of the MSCI Emerging Markets equities index; its weight is even bigger in EM debt markets. Read more
Members of the board of governors of the European Bank for Reconstruction and Development will choose the bank’s next president on May 11. It has been clear for some time that they will re-elect the current one – Sir Suma Chakrabarti – despite a heavyweight challenger in the form of Marek Belka, the governor of Poland’s central bank. For this reason, this election is generating less excitement than the previous one when five candidates (myself included) squared off in one of the more open races for the helm of a multilateral institution.
Truth be told, Sir Suma and his team have done a good job under demanding circumstances. In addition to the global economic slowdown and related woes with non-performing loans, the EBRD has had to deal with many specific challenges: the start up of its operations in Arab Spring countries, a supposedly temporary expansion of its mandate to Greece and Cyprus, and significant retrenchment from Central and Eastern Europe by western banks. Last but not least, the Ukraine-related decision of a majority of its shareholders to stop new projects in its biggest and most profitable market, Russia, required deft redeployment of financial and human resources. Thankfully, the EBRD has come out of this turbulent period with a rare AAA rating, a comfortable capital cushion and recovering profitability on an expanded portfolio. Read more
As a strategically vital trade hub and home to nearly 70m people, Central Asia has for too long lacked representation at the top table of global politics.
To date, no Central Asian country has sat on the UN Security Council. This is despite the increasing prominence of the area, not just as a geopolitical player, but as an emerging power with its own unique identity, relationships and above all experiences. This June will see the decision of the UN General Assembly on five non-permanent members of the UN Security Council for 2017-2018. We hope that Kazakhstan will be given the honour of being one of these new members. Read more
In 2009, Bassirou Bonfoh, director of the Centre Suisse de Recherches Scientifique (CSRS) in Cote d’Ivoire joined forces with 10 other African institutions to collaborate on research into infections that pass between animals and humans, many of which are now sadly world famous including Ebola, HIV and Zika.
The collaboration enabled him to access data from as far afield as Tanzania and extend his remit to rift valley fever, an infection that has had several outbreaks since its first detection in 1931. Read more
For some, China represents a positive scenario of structural reforms returning the country to its position as the engine of world growth. Not only do we think this is unlikely, we actually believe China poses a systemic risk of historic proportions.
It is now clear that China is not smoothly passing its growth baton from exports and investment to the service sector. Official GDP data still show growth, but this has decelerated significantly despite numerous interest rate cuts and massive fiscal support. Read more
By Tomás Guerrero, IE Business School
Nearly all muslim-majority countries currently import much of the food they consume, with imports, as in the case of the Gulf Cooperation Council (GCC) countries, above 70 per cent.
Thus they are net importers of food, and the vast majority of it is halal. In 2013, Muslims spent $1.2tn on food and drink, the equivalent of 17.7 per cent of total world expenditure on food in that year. Of this, $1tn was spent on halal food by the muslim communities in the 57 member countries of the Organisation of Islamic Cooperation.
There are three main factors explaining this dependency: adverse climate, the lack of the knowhow and technology needed in order to boost food productivity and the rapid growth of populations with increased disposable income who are starting to adopt Western patterns of consumption. Read more
By Edward Robinson, Culmer Raphael
Algeria is in a tight spot. Last year, a $5bn trade surplus turned into a $14bn deficit. Hydrocarbon revenues account for around 95 per cent of exports and the government needs an oil price of well over $100 to balance its current budget. Domestic consumption continues to rise, eating up around half of total production, and some economists have questioned whether domestic capital markets will be able to fund a budget deficit of the scale and duration predicted. The country faces a triple challenge: it needs to boost energy efficiency, speed-up infrastructure investment and diversify its economy.
That’s the bad news. The good news is that the government appears to be heeding Churchill’s advice never to let a good crisis go to waste. It is being candid with the public about the scale of the challenge and is coming forward with a range of measures, the sum of which could lead to a genuine improvement in the business climate, as even the IMF noted in a recent trip to Africa’s largest country (and Europe’s second-largest supplier of natural gas). Read more
Kazakhstan’s 25 years of political stability owe much to the leadership of President Nursultan Nazarbayev, making the prospect of the septuagenarian’s departure a significant source of the jitters for investors in the country.
Yet now, personnel movements and investment activities involving members of the Nazarbayev family, alongside institutional reforms, indicate that preparations for his succession may finally be in the offing. The handover of power, when it comes, threatens to unbalance the predictability of the political environment and fuel uncertainty over the future direction of government policy. Read more
Twenty years ago, I was told that emerging market shares were like mining stocks. This sounded an unglamorous if not outright demeaning description for one of the greatest growth stories the world was yet to see. But as the fortunes of emerging markets subsequently rose and fell in tandem with commodities, this adage rang more and more true. Two decades of data demonstrate convincingly that, despite their perceived long-term growth attractions, the performance of emerging assets depends primarily on the business cycle.
Every cycle reaches an extreme on the way up and on the way down. Persistent trends create their own mythology and investment fashions. The massive distortion of the financial markets by developed-market central bank intervention caused the long under-performance of value globally. To buy cheap assets is seen as horribly outmoded. Emerging markets are, therefore, “cheap for a reason”. Read more