The plummeting valuation of China’s banks suggests that investors are losing confidence in China’s growth prospects.
An “efficient” market is one that has an efficient mix of investment strategies. Without this efficient mix, the market itself fails in its ability to allocate capital productively at reasonable costs.
Unless Japan moves quickly to pay down debt, perhaps by privatizing government assets, Abenomics will be derailed by its own success.
The fact that Beijing can recapitalize China’s banks during a debt crisis should not be reassuring: the debts must still be paid, and doing so will decrease demand and slow future growth.
As China's economy rebalances over the coming decade, average growth of 3-4 percent is likely to be the upper limit on what Beijing can achieve.
Urbanization accommodates but does not cause growth and the current push for urbanization will only make China richer if it increases productivity by more than it increases debt
The Chinese growth model is not radically new. It is based primarily on the growth model developed by Japan in the twentieth century, and it has been implemented in various forms by many countries.
Further fiscal stimulus might create growth in the short term, but would be harmful for China in the future.
China’s low level of social capital constrains its ability to absorb additional capital stock productively, causing the country to over-invest.
National savings represent a lot more than the thriftiness of local households, and as such it has a lot less to do with household or cultural preferences and more so with the policies or institutions that restrain the household share of GDP.
The speed of China’s growth in the coming decade depends on whether or not it is possible to maintain current levels of consumption growth once investment growth is sharply reduced.
It may be useful to think about Japan as a model for understanding the adjustment process in China, since the Japanese model shows how risky it is to shift to a slow-growth model.
China’s leadership is saying all the right things, but the political and economic challenges they face to achieve meaningful reforms remain daunting.
To assess China's rebalancing in 2013, look for how quickly growth slows, how much debt grows, and the movement of inflation and trade figures. Globally, keep on eye on Target 2, Spanish bonds, and Japanese debt.
Higher growth in China is no longer compatible with a strengthening balance sheet. Fortunately, the current Chinese leadership recognizes the need to implement informs and understands that it is going to be a politically difficult process.
A new report suggests that even under optimistic scenarios, it will be very hard to maintain a high rate of investment in China. The challenge is to find a readjustment strategy that does not lead to a sharp drop in GDP growth.
A new worldwide monetary contraction could reverse many of the advances in globalization that the international community takes for granted.
The current cycle of globalization could end in a painful period of debt adjustment and payment imbalances across the globe, with a likely slowdown of growth in China, a possible abandonment of the euro, and the risk of increasing U.S. protectionism.
Ineffectual loan quotas have led Chinese banks to devise new, riskier lending mechanisms. This trend will continue as long as China maintains its loose monetary and credit policies.
Chinese growth may continue at a rapid pace this year, but a growing liquidity-induced bubble will eventually require major reforms.