Counterparties: Fragile China

October 18, 2012

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As goes China’s growth rate, so goes the world economy — slowly. In the third quarter, Chinese growth dropped to 7.4% from 7.6% in the third quarter, the NYT’s Bettina Wassener reports. That’s the slowest growth rate since 2009 and below the government’s target of 8%.

Despite companies like Nestlé and Nokia saying that China’s slowing demand hit their profitability, indicators like industrial production and retail sales did increase. It’s also worth remembering that the Chinese economy has the wind of a $157 billion infrastructure program at its back.

China’s official economic data is notoriously difficult to interpret. Kate MacKenzie offers a guide to help you sort through its intricacies. Just as we’ve seen recently in the US, some are quick to say that the fix is in. In this case, electricity consumption, railway freight, and loan volume suggest that growth is lower than officially reported.

China isn’t just an economic bellwether; it’s also a political football. Josh Barro labels the idea that the US should “get tough on China” one of the five worst ideas that both Barack Obama and Mitt Romney agree on. The value of China’s currency has risen 11% since 2009, and Paula Dwyer argues that calling China a currency manipulator decreases any leverage Washington might have over Beijing. Beyond that, labeling a country a currency manipulator is largely an empty gesture: “you ask them to stop it“, the Treasury Department investigates, and then there are negotiations over the exchange rate. But since the US and China are already engaged in these discussions, it’s unclear what the label itself adds.

Shen Dingli notes in Foreign Policy that “China won’t have as much to worry about with a President Romney… he and presumably Xi Jinping will likely shake hands and forget” the rhetoric of the campaign — much as Obama and Hu Jintao have largely done since 2008. Still, Mohamed El-Erian thinks Romney should mute his rhetoric before his potential inaguaration. — Ben Walsh

On to today’s links:

“PENDING LARRY QUOTE”: Google blame’s midday earnings release on financial printer – WSJ

Strangely Existential
The profound pessimism of America’s corporate executives – WSJ

Inside the rift between Vikram Pandit and Citi’s new board chairman – Dealbook

Newsweek is ending its print edition in 2013 – Huffington Post
When Newsweek dies, who will tell us if our babies are racist? – Vanity Fair

“The government has criminalized whistle-blowing” – Bloomberg

Why “we must deliberately set financial forest fires” at random – Interfluidity

White Collar Punishment
Rajat Gupta would prefer to join the Peace Corps instead of going to prison for insider trading – Dealbook

The Greg Smith Files
Goldman: Greg Smith quit after he was denied a raise to a salary of more than $1 million – Bloomberg

Good Timing
Mega Millions Jackpot winner: My girlfriend just dumped me – Boston Globe

Possibly Useless Data
How much time do you spend online? The failures of self-reporting – Noah Brier

Equity is the new cash (again) – PandoDaily

The moral hazard of too big to fail, pension edition – Asset International CIO

Big Numbers
Italian corruption, the 76th largest economy in the world – WaPo

True Truisms
Breaking: “The banking industry must work much harder” to restore its reputation – American Banker

TOP 10-Q
Morgan Stanley catching on to this whole fixed income trading thing – Reuters

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