The Great Debate (India)

India at G20: Will yuan revaluation overshadow talks?

As India heads to Canada for the weekend G20 summit, the grouping’s agenda is expected largely to be dominated by China’s currency reforms and the global economic recovery.

The United States, a major trading partner of China, has been cautious in its criticism of Beijing’s tight currency controls.

U.S. Treasury Secretary Timothy Geithner in April delayed a decision on whether to name China a currency manipulator in favour of bringing in pressure on Beijing at larger global forums such as the G20.

China’s central bank recently pledged to increase currency flexibility after pegging the yuan to the U.S. dollar for nearly two years.

Indian economists have said China’s undervalued exchange rate affects emerging market economies more than it does the United States and that New Delhi may be persuaded to support a broad-based effort aimed at currency rebalancing at the G20.

Given India’s robust growth, will it be able to use the G20 platform to push pending issues such as IMF reforms? Will the yuan debate dominate the talks?

from The Great Debate UK:

Pranab Bardhan on the economic rise of China and India

In its May economic outlook, the Organisation of Economic Cooperation and Development projected upward growth outlooks for BRIC countries Brazil, Russia, India and China -- the world's four largest emerging economies.

Strong growth in those economies is helping to pull other countries out of recession, the OECD said. The Paris-based organisation projects that China’s GDP growth will exceed 11 percent for 2010, and anticipates that India's real GDP growth will be 8.3 percent. Russia's GDP growth is expected to be 5.5 percent, and Brazil's is projected at 6.5 percent. By comparison, the OECD projects that the Euro area will see 1.5 percent real GDP growth, while the UK will see a 2.2 percent growth.

The "BRIC" acronym was created by Goldman Sachs economist Jim O'Neill in 2001 to mark a shift of economic power from the West. In June 2009, the BRIC leaders met in Yekaterinburg, Russia, for a summit, which was seen as the beginning of a geopolitical alliance, although their economies are very different: Brazil's economy is based on agriculture; Russia's on energy exports; India's on services and China's on manufacturing. At that time, the BRIC countries accounted for 40 percent of the world's population and about 15 percent of its economy.

In a new book titled "Awakening Giants, Feet of Clay: Assessing the Economic rise of China and India", Pranab Bardhan, a professor of economics at the University of California, Berkeley, dissects some generally accepted beliefs about the economies of China and India -- arguing that they are oversimplified -- to provide a new perspective on what to expect from the two countries in the future.

He examines the impact of economic growth on politics, people and the environment within China and India.

Bardhan spoke to Reuters about his book at his office at the London School of Economics where he is serving as BP Centennial Professor for 2010 and 2011. Watch the video here:

from Global Investing:

Time to kick Russia out of the BRICs?

It may end up sounding like a famous ball-point pen maker, but an argument is being made that Goldman Sach's famous marketing device, the BRICs, should really be the BICs. Does Russia really deserve to be a BRIC, asks Anders Åslund, senior fellow at the Peterson Institute for International Economics, in an article for Foreign Policy.

Åslund, who is also co-author with Andrew Kuchins of "The Russian Balance Sheet", reckons the Russia of Putin and Medvedev is just not worthy of inclusion alongside Brazil, India and China  in the list of blue-chip economic powerhouses. He writes:

The country's economic performance has plummeted to such a dismal level that one must ask whether it is entitled to have any say at all on the global economy, compared with the other, more functional members of its cohort.

I have just returned from Moscow, which is always dreary around this season. But this year, the mood among the capital's eloquent liberal economists has hit a new low. For the last seven years, Russia has undertaken no significant economic reforms. Instead, the state has been living off oil and gas, like a lucky but undeserving rentier."

Economically, Åslund has the numbers on his side. The International Monetary Fund estimates that the Russian economic will contract by 6.7 percent this year, while China will grow 8.5 percent and India 5.4 percent. There is less of a case for Brazil, with a contraction of 0.7 percent projected, but it is still doing far better than Russia.

But the BRICs concept is not just about economics. As mentioned, it is a marketing device to urge investors to focus on the big emerging players. From an investment standpoint, it could be argued that Russia is leading the BRICs. Its stock market is up 128 percent this year versus around 80 percent for the other three.

At very least, however, Russia's economic underperformance and stock market outperformance does suggest it is the outlier of the group.

from The Great Debate UK:

G8 signals end to dollar supremacy

- John Kemp is a Reuters columnist. The views expressed are his own. -

Reports that China has asked for a discussion about reserve currencies at next week's expanded Group of Eight summit in Italy has added to confusion about whether the country wants to dethrone the dollar from its status as the world's sole reserve currency. But the very fact the issue has been pushed onto the agenda suggests that a fundamental shift is underway.

Given the U.S. government's enormous borrowing requirements over the next decade to cover the bank bailout, fiscal stimulus and deficits in Social Security and Medicare, the dollar's reserve status depends on emerging markets' continued willingness to accumulate U.S. liabilities rather than switching to other stores of value, such as the euro or the IMF's Special Drawing Right (SDR).

As the largest buyer of U.S. Treasury securities, China can break the dollar's reserve currency status any time it wants. But it would risk large losses on the stock of U.S. debt that it has bought already. The resulting unstable stability is the foreign exchange version of the Cold War stalemate based on "mutually assured destruction".

Senior Chinese officials have given off mixed signals about their intentions.

When pressed, officials have indicated China will continue to stand by the dollar in the short term and denied the country has begun to diversify its official holdings. But that has not stopped People's Bank of China (PBOC) Governor Zhou Xiaochuan floating the idea of shifting to a super-sovereign currency based around the SDR.

Zhou's call for diversification was repeated last week in the central bank's annual stability report, which noted that "an international monetary system dominated by a single sovereign currency has intensified the concentration of risk and spread of the crisis". It went on to urge the IMF to exercise closer supervision of the economic and financial policies of major reserve-issuing countries.

from The Great Debate:

Advancing global Internet freedom

-- Leslie Harris is the president and CEO of the Center for Democracy and Technology in Washington, DC. The views expressed are her own. --

In the wake of troubling reports as recently as last year that Western companies were assisting China with Internet censorship and the unmasking of cyber-dissidents, governments around the world seemed poised to regulate the conduct of Internet companies. Lawmakers appear to have stepped back from those efforts, but the challenges of advancing global Internet freedom remain.

The Global Online Freedom Act, drafted in the U.S. Congress, would have made it a crime for Internet companies to turn over personal information to governments in cases where that information could be used to punish dissent. The bill produced a firestorm of controversy. Human rights groups campaigned for swift passage, while the tech industry scrambled to stop the bill, which they viewed as a global eviction order from many difficult but emerging markets. At the same time, several members of the European Parliament proposed a European version of the measure, taking the accompanying controversy global.

Now policymakers seem far less certain that global Internet freedom will be served by imposing harsh mandates on Internet companies that provide crucial services to customers in repressive regimes. The bill has not been reintroduced in the U.S. Congress this year, and earlier this month, a top European regulator, European Union Telecommunications Commissioner Viviane Reding, dismissed the notion of Europe passing its own Global Internet Freedom Act, saying that she was not convinced that "hard law" was the best way to address the issue.

For Internet executives who feared that hard-line regulatory mandates might force them out of many countries, Reding's comments came as welcome relief. But celebration is premature. Threats to Internet freedom are growing and lawmakers’ concerns about industry's role remain rightly high.  Those who choose to misconstrue Reding’s remarks as a free pass on this important issue do so at their peril.

Now is the time that Internet and technology companies must step up and take on the very challenges that the Global Internet Freedom Act was intended to address in order to ensure that their services and technologies do not become tools for surveillance and oppression.

Lest companies argue that the problem is too big and complex for any one company to make a difference, there is a responsible way forward. Late last year, a diverse coalition of leading information and communications companies, major human rights organizations, academics, investors and technology leaders launched the Global Network Initiative, which seeks to provide a framework to help information and telecommunications companies chart an ethical and accountable path forward through the growing demands from countries to take actions that infringe on the freedom of expression and privacy rights of their users.