James Pethokoukis

Politics and policy from inside Washington

A China reality check

Oct 28, 2009 18:26 UTC

Thomas PM Barnett makes good sense, as usual:

Japan’s rise and decline should serve as a grim warning to China right now.

Japan got old, but China will get older faster. Japan kept its environment relatively clean, China is trashing its own. Japan built its manufacturing power on excellent goods, China is fly-by-night by comparison (reading a book on that now).

In sum, China has so many huge hidden deficits incurred during its rise, that I think it will suffer future stagnation that makes Japan’s seem tame, especially since China’s political system is so brittle and unimaginative.

I guess I’m just responding to all this China-will-rule-the-world vibe connected with the 60th b-day celebration. As soon as I read stuff like that, the Irish in me says you’re heading for a fall.

COMMENT

It’s kind of sad that people have to look to China for hope. It really is a terrible land, aside the wonderous construction projects that are meant to overpower the senses and confuse us. A land that feels it needs to make monuments to power really has none… they’re growth rates are completely doctored, corruption is open and rampant, the gov’t keeps the currency pegged artificially, and the gov’t uses the military to control the citizenry. Though it is little reported here, there are numerous regions of (essentially) open revolt in China, not to mention occupied land (Tibet) which spurs more defiance from the people. So while the coast cities may seem like a beacon to the future, the rest of the country is in chaos and in big trouble. So much for the Chinese miracle… the real miracle will be if they survive a sustained downturn in the American economy.

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Popping the China Bubble

Oct 23, 2009 19:27 UTC

Good sense from Michael Auslin in The American:

Just like today with China, pundits, investors, and the media largely proclaimed that the Japanese party would go on forever. Today, the sophisticated management of the Chinese government is offered as proof that China will always experience growth (or if contraction, a soft landing). Back in the 1980s, Japanese companies were assumed to have discovered the secret to hyper-efficient production and thus endless profits, while the country’s bureaucrats were lauded as perfect macro-planners. Inefficiencies, protected industries, poor management, and a sclerotic bureaucracy were all ignored by those who wanted to believe the hype. Yet such weaknesses were exacerbated by a culture of excess that destroyed consumer reality. Once it took root in Japan, expectations changed permanently and traditional restraint was abandoned. The savings rate dropped, and people paid exorbitant amounts for new houses and cars. I remember watching as whole parties in Tokyo restaurants walked away from tables full of food that was ordered and then left to be thrown away. The economics fed and then followed the social disease. Eventually, the asset bubble burst and the whole edifice came crashing down.

COMMENT

Funny how when the Japanese are observed to be wasteful it gets some ink. Here in the states, we’ve been disgracefully wasteful for decades and every system in place encourages it. Never mind those old folk who actually remember the rationing of the 40s and the hunger of the depression. Those are the true conservatives,,not those money mad asses who claim the label these days.

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IMF ups its estimate for 2010 global growth

Oct 1, 2009 11:44 UTC

Another unsurprising economic forecast that portends continued high US unemployment next year.

imfchart

COMMENT

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Dude, where’s my civilization-wrecking depression?

Aug 24, 2009 13:57 UTC

Geopolitical thinker and strategist Tom Barnett is disappointed with the resilience of the global economy and institutions:

As always, I am disappointed that roving gangs don’t roam my streets and we haven’t all been reduced to survivalism. Still waiting on the many wars as well. Not even getting a slew of new leftist governments.

As global recessions go, a complete disappointment for the professional hysterics. But I’m sure it’s a complete anomaly to be explained away. I look forward to the posts, and place my continuing faith in an electronic Pearl Harbor (over a decade now in the frantic predicting/making) that will bring the entire world to its knees overnight, ending life as we know it. Certainly, when it comes, it will render all our current problems completely meaningless in comparison, so I wonder why we’re even bothering to debate healthcare reform.

Me: And all that money I spent on a bug-out bag has been wasted! Wait, there is still Captain Tripps, I mean, the swine flu! And what about peak oil?

COMMENT

It will happen James and I hope you live long enough to see it. Why are reporters always such fools?

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The global economy and the day after tomorrow

Aug 15, 2009 00:24 UTC

A really great article in the FT that serves to dispel some of the doom and gloom that pervades much of current thinking:

In spite of the economic implications of a more restrained credit environment and of rapid ageing, it would be as myopic to presume that our destiny is secular economic decline as it would be to believe that, in time, we will revert to the status quo ante. … The pressure on labour supply can be alleviated by strategies to raise the participation in the labour force of the two groups that are under-represented, namely, the over-55s and women. This is likely to involve extended working lives, changes in the organisation of work, more affordable childcare and family-friendly policies at work.  … The quality and productivity of the labour supply can be improved greatly by strengthening the education system, including universities, and by developing and expanding learning programmes throughout working lives.

Technological change may redefine the boundaries of future economic growth much as information technology has in the last 20 years. New IT applications are likely to augment production, design and the dissemination of information. Advances in materials will improve electronics, transport, energy systems and medicine. Genetic engineering is expected to lead to new products and processes in medicine, food production, plastics, chemicals and fuels. Nanotechnologies that build products more cheaply and precisely from individual atoms and molecules, could potentially revolutionise automation and robotics; and the fusion of nano, IT and genetic sciences could be as significant as any innovation so far.

North Korea: Global markets are also potential prisoners — and Clinton can’t help them

Aug 5, 2009 13:40 UTC

Strategist Andy Busch of BMO Capital Markets provides some interesting insights on the situation in North Korea:

While the Obama administration denies this, the fact Clinton was allowed to go signals a major shift in foreign policy by the US towards the rogue regime.  It could be laying the groundwork for good relations during a power transfer from Kim Jung-Il to his son which may happen sooner than most think.
It’s this transitional period that will be extremely dangerous and may see NK become more belligerent with missile launches and fishing boat seizures. Internally, North Korea could implode and their nuclear material may be at risk.  An incident would garner world-wide attention and a response from either China or the US.  China’s biggest concern would be for a mass of North Koreans coming into their country as refugees.  Japan and South Korea’s biggest concern would be for a missile to be launched towards them.
While I was at the Pacific Economic Conference in Vladivostok, Russia, attendees were very concerned over the developments in North Korea.  Everyone was worried about what would happen to Russian oil and natural gas exports should North Korea explode.
North Korea is inherently unstable.  During a power transition, it will be even worse and more difficult to predict the outcome. Markets should have a strong risk off reaction with equities sold, bonds bought, and US dollar bought.  Watch for it.

A quick look at Chimerica/Americhina

Jul 27, 2009 14:33 UTC

Here are three chart to give a feel for the current state of the US-China economic relationship (via the econ team at Action Economics):

072709chinachart3

072709chinachart2

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Is China experiencing a credit bubble?

Jul 17, 2009 14:08 UTC

Here are several great charts from Wachovia looking at the Chinese economy in an effort to determine if the nation is experiencing a lending bubble. The firm doesn’t think so — at least not yet — but given government influence in its capital allocation system and the need to keep growth high in a weak global economy, I have to wonder.

china2julyy17

china1julu17


china3july17

North Korea collapse could cost $1 trillion

Jul 13, 2009 16:43 UTC

This from my Reuters colleague Dean Yates:

South Korean estimates have said it would cost $1 trillion or more to absorb the North. Financial markets in Seoul would plunge given how expensive and messy such a transition could be.

My spin: I am sure the South has watched the German example closely and shuddered.

COMMENT

James is correct about the South drawing grim lessons from the German reunification experience. I recently viewed a documentary on NK in which a SK government adviser said precisely that.

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