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Mexico: Food exports increased in 2013

Mexico: Food exports increased in 2013 | Emerging Economies1 | Scoop.it
Mexico's agricultural and agroindustrial food exports in 2013 increased by 7 percent, reported the Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA). Based on information from SIC -Agro, the ministry said that food exports amounted to 24,408,000 dollars. SAGARPA's Secretariat for Food and Competitiveness system said that, last year, the country had exported agricultural and livestock products valued at 11.326 million U.S. dollars, a 4% percent increase in annual terms. Regarding agroindustrial goods, Mexico sold 13.082 million dollars, which represents a 10 percent increase when compared to the 11,890 million dollars obtained in 2012. The country sells more than 290 food products abroad (including coffee, chocolate, tequila, tomato and avocado), which are sent to more than 160 countries and international destinations. Among the main Mexican agricultural products sold abroad are: red tomatoes, which increased by 8.7 percent and had sales for $1.856 million dollars; avocados, that increased by 24.5 percent and amounted to $1,228 million dollars, and bell peppers, which had a 12.3 percent increase and totalled $876 million dollars in exports. Other important products that Mexico exports would be: vegetables, with a value in 2013 of $ 524 million, raspberries, 513 million; cucumbers and gherkins, 436 million; onions, 358 million; watermelons, 316 million, strawberries, 314 million, asparagus, 294 million, almonds, walnuts and pistachios, 285 million, and limes, 276 million. The top five destinations of Mexican products, where 84.7 percent of food exports in 2013 were sent, were the United States, Japan, Canada, Venezuela and Guatemala. Source: Sagarpa.gob.mx Publication date: 3/7/2014
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To Renminbi Or Not to Renminbi?

To Renminbi Or Not to Renminbi? | Emerging Economies1 | Scoop.it

Why China's currency isn't taking over the world.



As China moves up the economic pecking order, it has been trying to promote its currency, the renminbi (RMB), as an alternative to the U.S. dollar. The Chinese government has ambitious plans for establishing offshore centers where companies can raise RMB funds, internationalizing its currency, and possibly enabling the RMB to supplant the dollar as the global reserve currency. The U.S. dollar isn't the only global reserve currency -- countries also keep some of their foreign exchange reserves in euros and yen -- but it has been the dominant one since the 1944 Bretton Woods conference.


During Tuesday night's presidential debate, Republican nominee Mitt Romney repeated his promise to label China a "currency manipulator" on his first day in office. The heated rhetoric on China in the debate, and throughout the campaign, over which candidate would be tougher on China's currency manipulation and other unfair trade practices reflects Americans' anxieties about the relative standing of the U.S. and Chinese economies, and it suggests that a shift to the RMB would resonate deeply in U.S. domestic politics. However, despite the bluster, the dollar will remain dominant.


Americans benefit from the dollar's hegemony: Because the world needs dollars, the U.S. government and American consumers can borrow at a lower cost. By conducting transactions in their own currency, U.S. companies reduce the hassle and the risk of sudden shifts in exchange rates. Americans also hold their heads a bit higher knowing that even with a struggling economy, governments all over the world still view the United States as the most reliable country for protecting their foreign exchange reserves. As the title of economist Barry Eichengreen's 2011 book puts it, it is an "exorbitant privilege" that Americans have come to take for granted. If the RMB supplants the U.S. dollar as the global reserve currency, the world financial system will hum to the tunes of China, and U.S. fiscal and economic policies will become more constrained by international pressures, including the threat of a sharp currency depreciation.


There are three degrees of RMB internationalization. First, China and its major trading partners transact in RMB; this has been happening since 2009. The next step is widespread third-party usage of the RMB in financial and trade transactions. In other words, only when parties undertaking transactions unrelated to China regularly use the RMB will it truly be an international currency. For the RMB to take the final step and become a global reserve currency, central banks around the world would have to maintain sizable holdings of RMB to insure against their own financial risks. In other words, the RMB would become a so-called safe-haven currency the way that the dollar and the yen are today.


China's limited financial system and its lackluster global reputation -- not U.S. fears of China's rise -- are preventing the RMB from becoming a global reserve currency. The demand is there. Because U.S.-dollar financial markets seized up during the 2008-2009 global financial crisis, businesses in Asia and other emerging economies desire an alternative trade settlement and reserve currency. The U.S. Federal Reserve stimulated recovery in the United States through "quantitative easing" -- increasing the money supply by buying mortgage-backed securities and Treasury bonds, which lowered the value of these holdings to foreigners like the Chinese, weakened the U.S. dollar, and stimulated capital outflows to emerging economies that increased inflation. China and other holders of U.S. debt viewed the Fed's actions as a sign that it would always put its domestic-policy objectives ahead of global monetary and financial stability.


Since China began allowing its companies to settle payments for imports and exports in RMB outside mainland China in 2009, the RMB's international use has grown tremendously. As of this June, all mainland firms can invoice and settle their foreign-trade transactions in RMB. Foreign direct investment by Chinese firms abroad and by foreign firms in China can now be denominated in RMB. And brokerage firms in Hong Kong are now permitted to sell global investors RMB-denominated exchange-traded funds, which directly invest in mainland bond and stock markets. Bilateral currency-swap arrangements with countries including Japan, Russia, India, Brazil, and Chile, which provide those countries' central banks access to RMB outside China, encourage companies to use RMB when they do business with China. As of this year, China has made 18 bilateral swap agreements for a total of more than $250 billion.


According to the People's Bank of China (PBOC), China's central bank, 6.6 percent of China's merchandise trade in 2011 was settled in RMB, a rise from 2 percent in 2010. The RMB customer deposits of Hong Kong banks increased from the equivalent of $46.5 billion in 2010 to $91 billion in 2011. A senior PBOC official revealed this June that the central bank allows more than 60,000 firms worldwide to transact in RMB. Hong Kong alone handled the equivalent of roughly $300 billion in RMB trade transactions in 2011, nearly one-third of all of Hong Kong's trade. Chinese companies, as well as foreign companies that conduct a lot of business with China, like using RMB because it reduces their need to hedge against the volatility of the dollar. If Chinese exporters can be paid in RMB instead of dollars, they do not have to worry that a sharp depreciation of the dollar vis-à-vis the RMB would hurt their future income. Despite all this, international use has not expanded to transactions beyond those with China itself.


Since the fourth quarter of 2011, forward rates have shown that the expectation that the RMB would be revalued has reversed direction. Investors now predict that the Chinese government will allow the RMB to decline in value to make Chinese exports more competitive. Market participants in Hong Kong and China are now willing to pay a premium in RMB above the prevailing exchange rate to gain access to dollars one year from now, which implies a bet on RMB depreciation. Therefore, the number of RMB export invoices rose as firms brought cheap RMB from Hong Kong back to China to take advantage of the relatively higher official exchange rate.


The level of RMB deposits in Hong Kong, a more reliable sign of offshore willingness to adopt the RMB, has declined since late last year. Since both Chinese and foreign investors bank in the economically liberal Hong Kong, RMB deposits there are a bellwether of general confidence in the RMB. Enlarging the pool of RMB circulating outside mainland China, a prerequisite for it becoming a global currency, thus might prove more challenging than first imagined, especially as global economic woes reduce demand for Chinese exports and put downward pressure on the RMB.


So will the RMB ever truly go global? That depends on whether Chinese decision-makers are willing to accept the risks involved in allowing capital to flow more freely in and out of mainland China. One major risk of capital-account liberalization, as this process is called, is that it could engender financial instability. The upside is that capital-account liberalization in developing countries tends to lead to higher economic growth, lower inflation, and higher returns on equity within two to three years after the reform. In the short term, however, it can cause volatility in capital flows, which can lead to deflation or inflation and even economic crises. Chinese leaders might be worried that if they make it easier to take assets out of China, more and more wealthy Chinese will hedge their bets by moving their children's education, their home purchasing, and their savings abroad. Because wealth is very concentrated in China, such a stampede for the exits could drain a substantial amount of deposits from China's banking system.


To reduce the risks associated with capital-account liberalization, China would need to liberalize its interest rate. The Chinese banking system keeps interest rates low to provide cheap loans to businesses. This penalizes households, which earn very little from their savings -- and invest in real estate instead. As long as domestic interest rates are artificially low, allowing the free flow of money will lead to large capital flows across borders as money seeks to take advantage of the higher returns outside the country. Interest-rate liberalization won't be a popular move in some segments of China's economy -- it would raise the borrowing costs for thousands of heavily indebted state-owned enterprises, for instance -- but it would prevent a substantial outflow of savings once money can freely move offshore.


But the biggest hurdle to internationalizing the RMB is China's reputation. During the 2008-2009 financial crisis, there was significant downward pressure on the RMB, suggesting that the currency was still not considered a safe haven. It is striking that when panic struck the global economy in 2008 and late 2011, international investors still sought safety in the United States and Japan instead of China, the world's second-largest economy. The overarching reason is that China lacks fundamental institutions, such as the rule of law and democratic leadership selection, that provide what analysts call "credible commitments" to the financial market about the sanctity of debt and derivative instruments. As large as the Chinese financial system is today (with nearly $21 trillion in assets, according to global rating agency Fitch Ratings), state-owned entities such as state banks and insurance companies own most of the financial assets. The government has not been able to credibly demonstrate to private investors that it will keep its hands off their money. Because the counterparties in most international financial transactions will be state-owned entities, global investors are unsure whether these state actors will renege on agreements or whether the opaque Chinese legal system will fairly adjudicate claims against state-owned counterparties or even the government itself.


If China reforms its core institutions to overcome these doubts, its currency will become a major global reserve currency and China will have arrived as a genuine global power. Yet despite Beijing's hopes, the world seems to be a long way from RMB dominance.

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South Africa needs to swiftly become a freer capitalist economy

South Africa needs to swiftly become a freer capitalist economy | Emerging Economies1 | Scoop.it
Economic growth, not legislation, will deliver full employment,...




IT IS widely known that I have become the chairman of the Free Market Foundation and that I describe myself as a strong believer in a capitalist economic system.


There are some people who believe that supporters of capitalism should be on the defensive. I disagree. Those who shout hardest that "capitalism has failed" are shouting so hard because their "noncapitalist" (socialist) policies have failed.


The root of the problem is that governments, through their central banks, have been printing money and debasing their countries’ currencies.


Through their excessive borrowing and spending, combined with the currency debasement, they created the financial crisis. And it is becoming increasingly clear that the crisis is not one of capitalism but one of government failure.


In fact, a study in the latest Economic Freedom of the World Report (co-published by the foundation ) "indicates that higher economic freedom is associated with a lower probability of a banking crisis".


Capitalism is about freely trading with one another, about co-operation, about not using fraud, or force, or the threat of force against anyone or their property.


I am talking about a free society and a just and moral way of interacting with one another. Important requirements of a free society, and a free economy, are respect for and the application of the rule of law.


Capitalism, simply defined, is a "voluntary exchange between individuals without interference from others".


There are some incorrect beliefs about the foundation that I would like to dispel. One of them is that, because big business funds us, we spend our time looking after their interests. That is not so. We do serve the interests of our supporters, but not so directly. We concentrate on trying to make South Africa a better place for everyone to live in. The fact that we promote capitalism, or free markets, or whatever you want to call a free economy, is in all of our funders’ interest as well as that of every person who lives in this country. There are few organisations whose work has as broad a reach as that of the foundation. We can rightly claim that we work for the benefit of all South Africans.


If you look at the work covered by the foundation’s staff, you will find that they are engaged in many activities intended to help low-income people.


They work with the unemployed to persuade the government to change the labour dispensation so that they can get jobs.


They appeal to the government to respect the constitutional property rights of those who have property and to give full freehold title to the people living in government-owned houses.


They also appeal for government-owned land to be used to give urban plots to the homeless so that they can build houses on their own land and for traditional communities to be given security of tenure over their land and their homes.


The foundation appeals to the local authorities to respect the rights of hawkers to earn a living for themselves and their families and for the authorities to stop the unwarranted confiscation of their goods.


The foundation has become involved in the energy-policy debate out of concern for the consequences for the country’s people if the electricity shortfall should lead to a large-scale loss of jobs and investment and a reduced quality of life.


Another concern is the effect on small businesses, especially those operating in the townships, of licensing, zoning and other regulatory issues.


We have to look to small firms to employ most of the 7.5-million people who are without jobs. For that to happen, small firms need to be regulated with a light hand, as they were in most countries, such as in Hong Kong in the 1960s, when there were large numbers of destitute people who needed jobs.


Unemployment worries me a great deal. It makes no sense that there are so many unemployed people. Common sense tells us that the only people who should be out of work are those who, for whatever reason, don’t want to or cannot work.


Why do we have this huge number of unemployed people?


Some academics tell us that it is because the people who have jobs have been given a high level of job security by the labour laws, such as laws against what is called "unjustified dismissal". Others tell us it is the minimum wage laws, or the red tape that goes with employing people, that are to blame. In casual conversation, the labour laws are regularly mentioned as being the primary cause of unemployment.


There are many studies and different views on the causes of unemployment.


I have not seen surveys or studies that have asked unemployed people what kind of jobs they would be prepared to take, at what wages, under what conditions, if the laws are changed to make it possible for them to have what they would accept.


I have also seen no surveys of employers to find out who would be prepared to employ the young, unskilled, old, long-time unemployed, and other jobless people who are turned down by other employers, and what kind of employment they would offer them.


It is the unemployed and their potential employers who need to be brought together to solve the unemployment problem.


Given our labour laws, how does an inexperienced, untrained person, without a matriculation certificate, and who will possibly take a year to become productive, get a job? Most matriculants struggle to get a job. Even with a university degree, they have no guarantee they will find work.


The latest statistics (for the strict definition of unemployment) show that 3.2-million (71%) of the unemployed people in this country are between 15 and 34 years old.


Besides doing something about the labour laws, the government needs to give careful consideration to the rest of the economic environment in the country.


The National Development Plan is a good start but it needs to give specific attention to the way South Africa has fallen on many indices that measure what is happening in the economy, and especially the fall in the country’s economic-freedom ranking.


Between 2000 and 2010, South Africa has slipped from 41st to 85th in the Economic Freedom of the World study of the levels of economic freedom in 141 countries.


This deterioration in our level of economic freedom is reflected in the uncertainty that prevails in the country, the dominant role being played by the government in the economy, in the huge number of unemployed people, in the persistently high crime rates, and in the growing number of reports about corruption and administrative failure.


Economic growth, not legislation, will deliver full employment, "decent" jobs and higher wages. For higher growth, we need large doses of capitalism — the voluntary-exchange variety of capitalism. South Africa urgently needs a swift change of direction towards a free economy.


• Mashaba is the chairman of the Free Market Foundation. Leon Louw, executive director of the foundation, begins a weekly column on these pages tomorrow.

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How Crowdsourcing Is Tackling Poverty In The Developing World - Forbes

How Crowdsourcing Is Tackling Poverty In The Developing World - Forbes | Emerging Economies1 | Scoop.it
Guest Post by Lauren Fisher | 3/21/2012


The global disparity with respect to data that fuels crowdsourcing requires action. While the West does its best to tackle the immense flow ofdata in various contexts (e.g., manufacturing, supply chain management, electronic discovery), in developing countries, entire societies are completely cut off from this exchange of information.


In a complete overhaul and modernisation of the global structures that have seen first world societies flourish while others struggle to survive day to day, data now stands to be the great leveller and democratizer. In the West we are handing over data to the Googles and Facebooks of this world in exchange for services, but the communities in developing regions that stand to benefit the most from an open information network are unable, as a result of lack of technological means, to take part in this exchange at all.
If you’re reading this article, chances are you are one of the privileged few (yes, few) benefiting from digital technology.


Unfortunately, as much as we might think that the digital revolution has arrived, the fact is that it has only arrived for some. You probably wake up in the morning and check your email on your BlackBerry, or flip open your laptop to scan the news. By the year 2030, however, there will still be 900 million people in the developing world who won’t have the means to turn on a light.


Modern technology, one of the most powerful catalysts for social change and quality living conditions, has yet to reach mass penetration across the globe. We still have a long way to go before developing countries gain access to the technology that will allow them to tackle daily hardships, many of which are unnecessary now that we have the technology to effectively alleviate them.


For citizens in the West, this open exchange of data, including crowdsourcing technologies, means we can scan through hundreds of user reviews on a single hotel on Trip Advisor, or search for nearby bars with user-submitted images on a mobile location service. We can do all this in real time. But these are fairly minor benefits of open data – small improvements to the comfortable life we already enjoy and insignificant compared to the manner in which the West leverages Big Data by combining it on a large scale with business analytics. Place this same crowdsourcing technology in developing regions and these luxurious benefits become fundamental game changers. Replace local bars with searching for the nearest local hospital that has the vital medical service one needs, or mapping local breakouts of violence and riots in post-election Kenya.


This exists, for example, in the form of Ushahidi, a crowdsourcing platform that was borne out of those riots and aims to gather and verify local informal reports crowdsourced through email, SMS, or social platforms to ensure people have access to the information they need. This can range from the location of the nearest medical supplies to which areas of town to avoid due to severe outbreaks of violence.


It exists in the form of Medic Mobile, a new initiative that aims to transform healthcare in the developing world through simple SMS. The reality for many people in remote regions of developing nations is a 100-mile trek by foot or oxcart to see the nearest doctor. So Medic Mobile has equipped over 100 community health workers with mobile devices to enable them to treat patients more effectively and keep up health and safety advice between appointments. The outcome is that through simple mobile technology, Medic Mobile in six months has doubled the number of patients treated with Tuberculosis in rural Malawi. It has achieved this by increasing the flow of data through mobile networks. Medical professionals are able to supply patients with information on medical supplies and improved safety advice that they, in turn, are able to access through mobile technology and external information sources.


The people that need to supply and receive the data must have the means to do so. Mobile technology is the key. Increasingly cheap handsets, ease of distribution, and the speed of both sending and receiving information make it the single most important way to connect communities in developing regions.


We are starting to make progress. In some regions, access to mobile devices already exceeds access to electricity. As highlighted by Practical Action, only 15% of the population of Kenya has access to electricity, yet the penetration of mobile phones is over 50%. The reach of mobile communication is vast and it facilitates communication between communities, allowing access to information to extend beyond those in their immediate vicinity, whether through phone calls, SMS or even mobile Internet.


When given the technology they need, developing regions flourish. Medic Mobile also runs a text messaging service to support patients in Kenya living with HIV by sending out frequent health advice. They can do this because they, in turn, are able to access the flow of medical data in networks, by being connected themselves. Nurses use their mobile devices as a reference point to access information and groups of farmers can even use simple SMS technology to share information that can help them improve their crops. This is the fundamental flow of data in action – individuals volunteering information that combines collectively to create a bank of data that helps entire communities. We now need to ensure that more and more groups have access to this vital technology.


Data in action


History has taught us that the flow of data—opening up communication channels—is a societal net positive. Compare the much-needed digital revolution in developing regions now to the newspaper revolution in the 1970s-90s in rural India. Whereas in 1976 there was approximately one newspaper available for every 80 citizens in the most remote regions, by 1996, through the arrival of new printing technology and an overhaul of newspaper institutions, this figure had risen to one newspaper for every 20 citizens. The result was a more open dialogue, educated citizens, a society more amenable to democracy and, most important, more jobs in small villages. The same thing now needs to happen on a bigger scale.


How Crowdsourcing Is Tackling Poverty


We are starting to hear the whispers of a digital revolution in developing regions, all enabled by public access to data. NextDrop, a project that started in a classroom at U.C. Berkeley, focuses on crowdsourcing through mobile technology to transform the way people access water. It is not uncommon for people in remote or poor regions to make an arduous trek to the local water source, where often they won’t know how long they have to wait before the limited supply is turned on for a short amount of time. Yet many of these people own mobile phones. Through an astonishing application of mobile technology, NextDrop allows utility workers to place a call to NextDrop’s system, alerting people when they have turned on the water supply. Residents who use the service are sent a text message that alerts them 30-60 minutes in advance that the water supply will be turned on. This means that people only need make the trip when they know water will be waiting for them at the end. Mobile Internet won’t work in this case, but SMS does on the extremely inexpensive handsets people in these regions already own.


This is, essentially, crowdsourcing the supply of water – the application of a relatively simple Western concept with profound effects in the developing world. This quintessential application of technology to poverty needs to be replicated far and wide and with similar—yet unique—initiatives.


When one starts to look at the power of crowdsourcing in developing regions, there is optimism in a nascent paradigm shift of the realities of a poverty-stricken community. Data flow has the power to effect change, not only politically and socially, but on more fundamental levels such as living standards and sheer survival. We are well used to the benefits of digital technology to share and collate data. We can review local health services based on what actual patients say through forums or dedicated websites. For years now we have been able to use Google flu trends to allow us to prepare for flu outbreaks, either in the home or in the emergency room.


When those services are placed in those areas that need them most, the potential is somewhat overwhelming. By supplying someone in a developing region with the physical means to access data, one not only automatically brings them into the loop of communication, but also introduces them into a whole new business infrastructure powered by crowdsourcing methodologies.
Cloud Factory, which launched at TechCrunch Disrupt in 2011, demonstrates how this can really work. Based in Kathmandu, Nepal, the service works along a similar concept as Mechanical Turk, which allows one to crowdsource employees through posting individual tasks. Companies that take part upload an ‘assembly line’ of jobs that are then posted out to Cloud Workers based predominantly in Nigeria, South Africa, Saudi Arabia and Nepal. They are focused on training workers in developing regions and running ‘microloan’ initiatives that enable participants to fund their own training while becoming completely self-sustainable. Their mission is to use technology to change the way the world works, so they use the concept of crowdsourcing to connect the people who have jobs to be done with the people who, given the right training, can get them done.


The power of services like Cloud Factory or NextDrop relies on the devices to which people have access. This is where the challenge lies. While we see penetration of mobile devices in some developing regions, the outlook is not as promising in a wider context. Estimated figures for 2011 show mobile cellular subscriptions in Europe and the Americas are at 119.5% and 103% per 100 people, respectively. (In some cases, respondents owned more than one mobile device.) In Africa, however the mobile subscription rate is 53%. In developing nations overall it is at 78.8%. Those who need mobile technology for survival too often do not have it. This is our challenge.




If digital technology comes low down the pecking order in tackling poverty, then enterprise comes even lower. But if we really aim to tackle poverty and democratise the world through the advancements of modern technology, then we must also facilitate entrepreneurship to allow small businesses in these regions to flourish and trade not only locally, but on a global scale.


This requires providing technologies – sometimes as basic as a mobile phone that connects aspiring business concerns and individual entrepreneurs with the outside world, enabling global trade and a true sense of enterprise. Consider, for example, the 4,000 women in Kenya who took part in a mobile-based initiative that allowed them to remotely access the training they need to become better entrepreneurs, such as how to manage finance, or build a business plan.

Mobile commerce and communication in developing nations can be as simple as a fisherman in one village making a call to a trader in another village to conduct business, and as life-changing as making that same call to warn a fellow fisherman of a life-threatening tide.


What Needs To Be Done


The unfortunate reality is that while we can see what modern energy, electricity, digital technology, electronic data and mobile can do for developing countries, we still have a long way to go before these services fully infiltrate developing countries. Too far, in fact, to be able to keep up with the growth of populations in certain regions. The number of people without access to electricity is actually increasing. In sub-Saharan Africa alone, this figure will increase to 691 million by 2030 and at a rate far higher than we see today.

We in the West need to act collectively to reverse the trends. And we know it can be done. It requires small actions like donating your old mobile phone to initiatives such as Hope Phones, which send them to people in developing regions where they can make a real difference in everyday lives. This is the technology that we too often relegate to the back of a drawer and forget about, whereas it could—and should—be in the hands of someone with a vital need to the data and information it can transmit.
Lauren Fisher is co-founder of the social media agency and blog Simply Zesty. Lauren has developed social media campaigns for a large number of brands, including Sony, Vodafone Ireland and Kaspersky. Lauren is a regular contributor to discussions in the social media industry and speaks regularly on the subject.

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China: Dangerous Denials

China: Dangerous Denials | Emerging Economies1 | Scoop.it



China's economy is blinding the world to its political risks.

There is a Chinese proverb that says "one spot of beauty can conceal a hundred spots of ugliness." Today, in China, there are few things as beautiful as the country's economic growth. But it is premature to dismiss the inherent instability in China's authoritarian politics. The country's rapid economic growth may be blinding us to systemic risks in Chinese domestic politics that, if poorly managed, could explode, threatening the survival of the regime. There is no question that China's economy is on the rise-but so are the risks of political crisis.


To be fair, some of the dangers China is facing simply come with the challenge of being a developing country racing toward a market economy. Shaking off socialism isn't easy for any nation. When you are the world's most populous country, the chances for socioeconomic disaster are enormous. Income inequality, for example, is to be expected. The period from 1980 to 1997 saw a 50-percent rise in inequality in China. Labor migration is natural. But China is experiencing the largest movement of rural labor in history. In recent years, Chinese cities have absorbed at least 114 million rural workers, and they are expected to see an influx of another 250 to 300 million in the next few decades. Under the circumstances, it's hardly surprising that China's effort to establish a new social safety net has fallen short, especially given its socialist roots. It would be a Herculean task for any government.


But China's isn't just any government. It is one that rests on fragile political foundations, little rule of law, and corrupt governance. Worse, it has consistently placed the highest value on economic growth and viewed all demands for curbing its discretion and power as threats to its goal of rapid modernization. The result? Social deficits in education, public health, and environmental protection. But it is hardly surprising, since promoting high growth advances the careers of government officials. Thus, China's elites devote most of their resources to building glitzy shopping malls, factories, and even Formula One racing tracks, while neglecting social investments with long-term returns. So for those who wonder how, if China's political system is so rotten, it can deliver robust growth year after year, the answer is that it delivers robust growth year after year, in part, because it is so rotten.


But the Chinese Communist Party knows that the people will tolerate only so much rot. Corruption is a rising concern. The party's inability to police its own officials, many of whom are now engaged in unrestrained looting of public assets, is one of Beijing's greatest worries. These regime insiders have effectively privatized the power of the state and use it to advance personal interests. Their loyalty to the party is questionable, if it exists at all. The accelerating effect on the party's demise resembles that of a bank run; more and more insiders cannot wait to cash in their investment in the party.


Of course, the Chinese government, like other authoritarian regimes, is constantly threatened by internal power struggles. Again, Beijing has not only bucked the naysayers, but its ability to weather internecine strife appears to have improved markedly since the 1989 Tiananmen tragedy. The recent transfer of power from Presidents Jiang Zemin to Hu Jintao turned out more smoothly than expected, perhaps signifying that the party has acquired a higher degree of institutional maturity. But it may still be too little, too late for an increasingly pluralistic and assertive population. Although the government managed to build an elitist ruling alliance of party officials, bureaucrats, intellectuals, and businessmen, the durability of this alliance is questionable. And, as in other countries, exclusionary politics inevitably breeds alienation, resentment, and anger. This does not mean that a social revolution is imminent in China. But should a crisis hit, all bets are off.


Thankfully, all of these risks are manageable if China confronts them with bold political reforms rather than denial and delay. But this may be wishful thinking. Beijing has thus far preferred these risks to the gamble of democratic reforms. The only thing certain about China's political risks is that they are on the rise. And that reality is hardly a thing of beauty.


Minxin Pei is director of the China Program at the Carnegie Endowment for International Peace.

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I.H.T. SPECIAL REPORT: GLOBAL TRENDS | Rise in China's Aging Poses Challenge to Beijing

I.H.T. SPECIAL REPORT: GLOBAL TRENDS | Rise in China's Aging Poses Challenge to Beijing | Emerging Economies1 | Scoop.it
Experts say the Chinese government, which sees a problem, can't deal with it alone.


By DIDI KIRSTEN TATLOW | Published: September 10, 2012

Forty minutes’ drive east of Beijing in Yanjiao, a town just inside the border of neighboring Hebei Province, a vast care facility for the elderly is rising in green fields, part of a solution to one of China’s most pressing challenges: fast-growing numbers of elderly people.


By about 2015, 12,000 places will be available at the facility, the private Yanda Golden Age Health Nursing Center, and a further 3,000 beds will be available in its affiliated, state-of-the-art hospital, both part of the sprawling Yanda International Health City.


The places will be needed. By 2015 there will be 220 million people more than 60 years old in China, compared with about 180 million today. Encouraged by Mao Zedong, who believed more was better, China’s population boomed in the middle of the past century. Rapid growth was cut short in 1979 when the state introduced the one-child policy.


Within 40 years, China will have nearly 500 million elderly people, according to current projections, or about one-third of its future population of nearly 1.5 billion, which will put a huge strain on its financial and human resources, experts say.


“There is no country in the world that is facing such a big aging population problem,” said Yuan Xin, a professor and director of the Aging Development Strategy Research Center at Nankai University in Tianjin and a member of a government committee drawing up new policies, to be announced at the end of the year. The state sees the problem and is preparing, Mr. Yuan said. But it cannot solve it alone. “The most difficult thing for China is that it will face the problem within the next 40 years,” he said by phone. “That’s a short time.” “The government cannot take on this whole burden,” he said “It has to be shared by the government, by society, families and by individuals.”


In fact, neither the state nor the private sector is sure how to cope, said Xue Shan, general manager at the Yanda facility. “It’s a new road for us, and we are ‘feeling the stones as we cross the river,”’ he said, quoting a Chinese proverb during an interview in his office.


This much is certain, experts say: The crunch is coming, and it will be an enormous business opportunity.


The government’s new policies are likely to continue a basic concept already in place, called Nine-Seven-Three: 90 percent of old people will remain at home; 7 percent will enter affordable, government-sponsored care, and 3 percent will live in private, expensive facilities like Yanda.


Mr. Yuan predicted that over time, the proportions would shift slightly, with about 80 percent of the elderly aging at home. He pointed out the considerable social shame attached in China to sending parents to old-age homes, considered by many an unfilial act.


Those family ties, though, are fraying. A recent poll by CCTV, the state broadcaster, drew widespread attention for its findings that about 33 percent of people surveyed visited their parents just once a year, and nearly 12 percent said they had not been home “in many years.” More than 16 percent of grown children saw their parents once a week, CCTV reported. And for many young people living far from home, working in the big cities, it is difficult to get home to care for aging parents. “China is becoming an empty-nest society,” Mr. Xue said.


But a richer one: Mr. Xue predicted that eventually, more than 3 percent of all Chinese would be able to afford private facilities like Yanda, where a bed in a two-bedroom apartment costs about 5,500 to 13,700 renminbi a month, or $880 to $2,150, depending on the level of nursing care. That is peanuts compared with the $4,000 to $6,000 monthly fees at assisted-living facilities in the United States, but still far above the means of most Chinese families.


Mr. Xue acknowledged that his facility was only a small part of the picture. “Solutions to the issue will vary,” he said. “The state does what we call Stage 1, the lower end. We do the top end.”


The real need, he added, is in the affordable range, which is subsidized by the state. Mr. Yuan said there were between seven million and eight million beds in the country. In July, China Economic Weekly magazine reported the government-run Beijing No. 1 Social Welfare Home, where a bed costs $110 to $570 a month, had a waiting list of more than 9,000.


Costs for government-financed places will be covered by a mixture of national and local government spending, with individuals’ pensions also contributing, Mr. Yuan said. He pointed out that the pension system was undergoing an overhaul, in part to cope with the challenge.


Whatever income group new old-age homes are designed to serve, the number of beds across China will have to rise fast, experts agree. That means more business — for somebody. Mr. Yuan did a quick calculation: 500 million old people paying 1,000 renminbi a month, comes to half a trillion renminbi a month.


How much foreign companies will be allowed to take part in that boom is unclear. Under the law, foreign providers of care for the elderly cannot run centers in China on their own but must find Chinese partners — a policy Mr. Yuan described as one of many that were “outdated” and “unreasonable.” Yanda is exploring cooperation deals with providers in the United States, Japan and Europe. Consulting contracts are also being signed with foreign businesses, from which Chinese companies can learn how to operate.


How to pay for this is equally unclear. By 2050, just 52 percent of the population will be of working age, Mr. Yuan said. Its members will need to support the 34 percent who are elderly and the 16 percent who are children. “How can China maintain its economic growth?” he asked.


In the meantime, governments are working on the infrastructure. In Beijing, the municipal government has decided it must earmark large areas of land for care for the elderly, in the same way land is designated for food markets or schools, The Beijing News reported in July.


The newspaper cited Chen Gang, the Communist Party secretary of the Chaoyang district of Beijing, as saying the city planned to allocate land along a highway circling the city’s suburbs for such facilities. “We’ll take that green, empty space and solve the problem of how to group old people together,” Mr. Chen said, according to the report.


At Yanda, they are already doing that. High-rise buildings rise in three long lines, each representing a stage in care: independent living, semi-assisted living and assisted living, Guo Pengfei, general manager of the facility’s marketing center, said during a recent tour of the site.

Lower buildings house the facilities found in any high-level care center for the elderly: a community center, restaurant, an “old people’s university,” a swimming pool, a reading room and, because this is China, a calligraphy room. At the front of the facility is a hospital, a state-of-the-art facility that is also open to the public.


So far, some 200 people live in the apartments, mostly retired government workers on generous pensions, Mr. Xue said. “We do also have some people from the private economy,” he said.

Yanda also offers something unusual for an old-age home in atheist China: religious facilities. The complex houses a traditional red and yellow Buddhist temple, a Protestant church, a Catholic church and a mosque. Their presence points to one of Yanda’s major ambitions: attracting wealthy overseas Chinese back home to grow old. “We know that overseas Chinese are often quite religious, so we built these,” said Mr. Guo, gesturing at the modest buildings. “We had to get special permission.”


Inside the Protestant Immanuel Church, Li Ruqi, 87, and his 85-year-old wife, who gave her name only as Ms. Yan (Chinese women do not change their names when they marry) said they were “empty-nesters.” Their five children all live in the United States and Canada. “It’s very nice here,” Ms. Yan said, smiling happily as her husband nodded agreement. “The food is great. You can order what you want, though we cook at home, too. There’s a lot to do.”

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La Banque mondiale prédit la fin du modèle chinois

La Banque mondiale prédit la fin du modèle chinois | Emerging Economies1 | Scoop.it

Par Arnaud Rodier | Publié le 27/02/2012


La croissance de la Chine devrait être diminuée de moitié dans les vingt prochaines années.


La Chine va devoir changer son modèle économique. Dans un rapport publié lundi à Pékin, intitulé «Chine 2030: bâtir une société à hauts revenus, moderne, harmonieuse et créative»,la Banque mondiale prédit que les 10% de croissance annuelle enregistrés ces dernières années vont diminuer de moitié au cours des vingt prochaines.


«Les dirigeants chinois admettent que le modèle de croissance du pays, qui a si bien réussi au cours des trente dernières années, ne sera pas efficace durant les prochaines décennies», affirme le président de la Banque, Robert Zoellick. Le pays dont les coûts de production ne cessent d'augmenter -Shanghaï a annoncé lundi une hausse de 13% du salaire minimum- n'est plus l'atelier du monde. Et «gérer la transition d'un pays à revenu intermédiaire vers un pays à revenu élevé sera une tâche rude», prévient le document.

Un document d'autant plus intéressant que le vice-ministre du Centre de recherche et de développement du gouvernement y a lui-même travaillé, et que le vice-président Xi Jinping et le vice-premier ministre Li Keqiang, qui doivent remplacer respectivement le président Hu Jintao et le premier ministre Wen Jiabao en mars 2013, lui ont apporté leur soutien.


Alors que le congrès du Parti communiste chinois doit se tenir à l'automne, autant dire que ce rapport apparaît comme la première feuille de route des prochains dirigeants chinois.


Six grandes orientations

Il préconise six grandes orientations stratégiques: parachever la transition vers une économie de marché, accélérer le rythme de l'innovation, se mettre aux énergies vertes, élargir les services de santé, d'éducation et d'emploi, moderniser et renforcer le régime fiscal et «relier les réformes structurelles de la Chine à l'économie internationale». Et il met en garde contre un«atterrissage brutal dans un proche avenir» ainsi que les «défis posés par le vieillissement de la population, la diminution de la main-d'œuvre et l'accroissement des inégalités».


Le rapport de la Banque mondiale demande également que soient «redéfinis les rôles des entreprises d'État», que l'on mette fin au «monopole dans certaines industries» et aux restrictions imposées aux étrangers dans les secteurs stratégiques comme l'automobile, l'énergie, la finance et les télécommunications.

Un vaste programme qui suppose des bouleversements en profondeur et qui risque de provoquer bien des grincements de dents. Il suffit de voir la Chine, forte de ses 3.200 milliards de dollars de réserves de change, les plus importantes du monde, lier son aide financière éventuelle sur la dette aux enquêtes antidumping de l'Union européenne sur certaines catégories d'acier pour s'en convaincre.

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Guerre de succession à la tête de la Banque mondiale

Guerre de succession à la tête de la Banque mondiale | Emerging Economies1 | Scoop.it

Par Jean-Pierre Robin |  publié le 16/02/2012


Les États-Unis entendent garder la présidence de l'institution, mais la Chine et le Brésil contestent la suprématie occidentale sur les postes clés.


La nature a horreur du vide. Quatre heures à peine après que Robert Zoellick, le président de la Banque mondiale, eut annoncé mercredi soir qu'il ne demanderait pas le renouvellement de son mandat, le secrétaire américain au Trésor, Tim Geithner, a publié un communiqué levant toute ambiguïté: «Nous comptons présenter dans les semaines qui viennent un candidat ayant l'expérience et les qualités requises pour faire avancer cette institution.»


Washington entend bien conserver un poste qui lui revient de facto depuis sa création en 1944. En même temps que le FMI, dont la direction générale a été sans cesse assurée par des Européens. Devenue aujourd'hui le premier vecteur de l'aide au développement, après avoir été créée pour aider à la reconstruction de l'Europe de l'après-guerre -la France a été son premier client-, la Banque mondiale a distribué 46,9 milliards de dollars de crédits nouveaux en 2011.


«Il n'y a aucune raison que le président de la Banque mondiale ait une nationalité spécifique», a déclaréGuido Mantega, le ministre des Finances du Brésil. Même son de cloche à Pékin: «La Chine espère que la Banque mondiale sélectionnera son prochain président publiquement, de manière compétitive et sur la base du mérite», selon un porte-parole du ministère des Affaires étrangères.


Une nouvelle procédure

Moyennant quoi ils ne font que rappeler le droit. Lors des assemblées des deux organisations à la mi-avril à Washington, il avait été décidé que la procédure de désignation «devait être ouverte, fondée sur le mérite et transparente». Fini le monopole des Européens et des Américains. Mais dans la pratique, les pays émergents s'étaient avérés incapables de se mettre d'accord, et Christine Lagarde l'avait emporté haut la main pour succéder à Dominique Strauss-Kahn.


L'histoire semble aujourd'hui se répéter: «Il est étonnant que les émergents n'aient présenté encore aucun nom, alors que tout le monde savait que Robert Zoellick ne demanderait pas son renouvellement, ne serait-ce que parce qu'il est républicain et que l'Administration Obama envisageait de le remplacer», observe un diplomate européen. Chat échaudé craignant l'eau froide, Augustin Carstens, le gouverneur de la Banque centrale du Mexique et ex-candidat malheureux contre Christine Lagarde, a fait savoir dès hier qu'il ne briguerait pas le poste.


Du côté américain, Hillary Clinton, la secrétaire d'État, longtemps présumée candidate, a elle aussi indiqué officiellement qu'elle n'était pas intéressée. Parmi les noms possibles, celui de Larry Summers, l'ancien secrétaire au Trésor, ainsi que celui de Tim Geithner.


La position américaine paraît d'autant plus forte que les pays émergents ne disposent que de 47% des droits de vote et qu'ils sont essentiellement des récipiendaires des crédits et des dons distribués par la Banque mondiale. Quant à l'Europe, en situation de quémandeur auprès du FMI pour le sauvetage de la zone euro, elle risque fort d'être le muet du sérail. Les Européens sont pourtant de loin les premiers contributeurs de l'aide multinationale au développement.

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Les pays du Sud en lice pour prendre la Banque mondiale

Les pays du Sud en lice pour prendre la Banque mondiale | Emerging Economies1 | Scoop.it

Par Mathilde Golla | publié le 21/03/2012


L'institution a toujours été dirigée par un Américain jusqu'alors, mais les pays émergents en revendiquent la gouvernance. Deux candidatures de leurs rangs pourraient être déposées.


Le compte à rebours pour la course à la présidence de la Banque mondiale est lancé. Les États ont jusqu'à vendredi, le 23 mars, pour déposer les candidatures de leurs poulains et, parmi eux, deux pays émergents ont déjà fait leur choix, selon l'agence Reuters. La ministre des Finances nigérienne, Ngozi Okonjo-Iweala, et l'ancien ministre des Finances colombien, Jose Antonio Ocampo, seraient d'ores et déjà en lice pour prendre la tête de l'institution, même si aucune candidature n'a été officiellement déposée pour le moment.


Ces deux candidats supposés sont reconnus sur la scène internationale tant pour leurs qualités d'économistes que de diplomates. Jose Antonio Ocampo bénéficie par ailleurs du soutien du Brésil tandis que Ngozi Okonjo-Iweala celui de l'Afrique du Sud. Le choix des candidatures a en outre fait l'objet de semaines de discussions entre les pays du Sud, notamment la Chine et l'Inde.

«Les deux candidatures sont de très haute qualité et mettent une forte pression à la Maison-Blanche qui devra désigner un candidat de qualité au moins équivalente», affirme Domenico Lombardi, un ancien membre du Conseil de la Banque centrale. «Les règles du jeu ont changé et pour la première fois, nous assisterons à une réelle élection», a-t-il poursuivi. Depuis sa création en 1945, l'institution a en effet toujours été dirigée par un Américain, en vertu d'un accord tacite entre les États-Unis et l'Europe, qui prévoit en contrepartie de réserver la direction du Fonds monétaire international à un Européen.


Le choix du candidat américain pas encore arrêté

Or, pour l'heure, aucun candidat ne semble faire l'unanimité aux États-Unis, même si le président américain Barack Obama assure qu'un nom sera donné d'ici à vendredi. Washington aurait déjà présélectionné récemment trois candidats potentiels pour succéder à l'Américain Robert Zoellick, qui doit abandonner ses fonctions le 30 juin. La candidature de l'ancien secrétaire au Trésor, Lawrence Summers, figurerait en pôle position. Problème, ce dernier est loin de séduire les pays du Sud en raison d'une polémique liée à son passage comme économiste en chef de la Banque mondiale.


Et si le candidat des États-Unis est assuré du soutien des Européens, il doit également emporter l'adhésion d'une majorité des pays du Sud. Le dernier mot revenant aux 25 membres du conseil d'administration qui représentent les 187 pays membres de l'institution. Et outre le manque de popularité du candidat supposé des États-Unis, les pays émergents et en développement rêvent de décrocher une place de choix à la tête d'une grande institution du système de Bretton Woods. Jusqu'à présent, ils avaient échoué à faire front derrière une candidature.


Leur plus grande concertation à choisir un candidat pourrait cette fois leur permettre de décrocher la place. La dernière élection du directeur général du FMI avait déjà suscité des espoirs dans les rangs des pays du Sud. Ils s'étaient toutefois finalement divisés et certains grands pays avaient finalement soutenu la candidature de l'actuelle directrice générale, Christine Lagarde. Il faut dire que la cote de popularité de l'ancienne ministre de l'Économie était élevée, aussi auprès des pays émergents.


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'IMF, WB continue to ignore emerging countries'

'IMF, WB continue to ignore emerging countries' | Emerging Economies1 | Scoop.it
An interview with Marco Pietropoli, economist with RM Wealth Management...


Thu Mar 29, 2012


An economist says the IMF and World Bank use their limited funds to bailout European countries while “there aren’t the funds available to invest in the developed world.”


The leaders of the BRICS nations - Brazil, Russia, China, India and South Africa - have agreed to look more closely into setting up a counter-weight to other multilateral lenders such as the World Bank and the IMF.


The so-called BRICS Bank would fund development projects and infrastructure in the developing world, while experts say traditional lenders have proportioned more funds on Western countries.

Press TV has conducted an interview with Marco Pietropoli, economist with RM Wealth Management, to further discuss the issue. The following is a transcription of the interview.


Press TV: First of all, the criticism of the United Nations’ Security Council as an outdated institution comes at a time when people are beginning to realize how emerging powers like that of India, Brazil, China and Russia have to be considered and can no longer be ignored in a world where the US and Western countries are basically calling the shots.


Pietropoli: I would agree. The structures that we have politically in the world are leaving the situation with the power at the end of the Second World War. Obviously the world has changed substantially since then.


These emerging powers which many are not emerging anymore, they are real powers - which are the BRICS countries - have a lot more say and, of course, they don’t have the weight on the IMF, the World Bank and the United Nations, which reflects their economic power but also the size of population as well.


Press TV: Speaking of looking more closely into setting up a counterweight into other multilateral lenders such as the World Bank, is that a testament to the failure of the Bretton Wood Institutions, namely the IMF and the World Bank?


Pietropoli: I don’t think it’s necessarily a failure, and I don’t think it’s necessarily about providing a counterweight. I think this is a pragmatic approach given the economic reality that we have in the world.


Traditionally, investment in the developed world has come from the Western countries which have funded and invested a lot of the development in emerging markets.


But of course, many Western sovereigns have real financial problems and also many Western banks have problems especially the European banks and, therefore, it is a situation where both the Western banking system and the sovereigns are de-leveraging. It’s very difficult for many emerging markets to access the investment needed for development.


Press TV: How much of it do you think has culminated from the recent economic and debt crisis that are resulting from the reckless, let’s face it, policies of the developed world?


Pietropoli: It’s all to do with that. It’s to do with the fact that, obviously, people are concentrated especially over the last year on the problems in Europe. A lot of the funding from the IMF help is going to Europe to try and stop the euro from collapsing.


What that means is that there aren’t the funds available to invest in the developed world and, of course, the emerging markets need development for infrastructure and to take their countries forward.

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HSBC GAM's Osses sees Europe and US weighing on emerging markets - Investment Europe

HSBC GAM's Osses sees Europe and US weighing on emerging markets - Investment Europe | Emerging Economies1 | Scoop.it

By: Guillermo Osses | 06 Jul 2012 

Uncertainty in Europe and the US is weighing heavily on emerging markets, says Guillermo Osses, head of EMD portfolio management at HSBC Global Asset Management.

The past ten years have witnessed emerging markets put in place a variety of structures in a bid to boost national balance sheets, inflation and productivity. These efforts should continue to help maintain currency performance as well as credit quality, which boosts the case for emerging market debt (EMD) as a potentially attractive asset class long-term.

But of course, EMD has its own challenges and obstacles to tackle. Take the first quarter, when many investors increased allocations to EMD, all within an environment where liquidity between banks had been squeezed, as a result of rising regulation.

In addition, the much-maligned current account deficit in the US has actually decreased significantly over the past five years. In 2007, the deficit clocked in at close to 6% of GDP to presently 3.5% and this is a pattern we expect to continue as the US government tightens fiscal policy in 2013, which in turn should help the greenback. But the uncertainty in Europe coupled with the risk of fiscal tightening in the US, is likely to continue to weigh on risk assets next year.

What we foresee as a result of all these issues is that volatility in emerging market assets will probably increase at least relative to what we experienced in the first quarter of this year. We feel at the current juncture, the risk/reward proposition of external debt looks potentially more attractive than that of local currency denominated bonds.

In terms of external debt, with a yield of 5.71%, plus a roll-down of close to 150 bps per annum, it is currently not unreasonable to anticipate potential returns to be in the mid to high single digits over the next 12 months.

But this view has been obtained under the proviso that G3 central banks remain relatively accommodative, European policymakers manage to steady concern, and the US ­government eases into its fiscal adjustment in 2013. While this may not echo the market consensus, we believe there is a more than fair probability for all three of the conditions above materialising.

In terms of EM currencies, the short-term valuation indicators which we monitor point to a scenario whereby in late April this year, currencies had become somewhat overvalued. But since then, the EM currency index has corrected erasing a large part of this overvaluation.

EM bonds denominated in local currencies endure nearly double the volatility as those denominated in dollars and the lowering of the current account deficit in the US is likely to make it harder for currencies to appreciate against the dollar, the case for most of the past decade.

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Number of the Week: Could Inflation Revive the Recovery?

Number of the Week: Could Inflation Revive the Recovery? | Emerging Economies1 | Scoop.it
The Fed should consider allowing inflation to run above its target until unemployment falls to a more stable level, some economists argue.


By Ben Casselman


4.2%: How high inflation would be if the Fed allowed prices to stray as far from its target as unemployment has.


The Federal Reserve has a dual mandate to promote both price stability and maximum employment. It’s a delicate balancing act: Focus too much on keeping inflation in check and the Fed runs the risk of strangling growth, driving up unemployment; focus too much on promoting hiring and inflation can quickly spin out of control.

Fed Chairman Ben Bernanke was on Capitol Hill this week to explain how the Fed is striking that balance. To judge by the questions they asked, most of Mr. Bernanke’s critics in Congress think the Fed’s easy-money policies are raising the risk of runaway inflation in the future.


But outside of Congress, much of the criticism of Mr. Bernanke argues that he’s strayed too far in the opposite direction, worrying too much about inflation — which might be a problem in the future, but doesn’t appear to be right now — and too little about the unemployment rate, which pretty much everyone agrees is too high.

In a speech last fall, Chicago Fed President Charles Evans laid out the argument this way: The Fed’s implicit inflation target is 2%. The Fed doesn’t have a widely cited numerical target for unemployment, but a conservative estimate of the “natural,” or underlying, rate of unemployment is 6%.


“So, if 5% inflation would have our hair on fire,” Mr. Evans said in September, “so should 9% unemployment.”


Unemployment has come down some since last fall, but it’s still at 8.2%, nowhere close to the Fed’s “maximum employment” mandate. By Mr. Evans’s logic (which he explains more fully in his speech), the current rate of joblessness is equivalent to inflation running at 4.2% — more than double the Fed’s target rate.

Mr. Evans has argued the Fed should consider allowing inflation to run above its target until unemployment falls to some pre-determined — and pre-announced — level. He got more support for that position this week from economists Menzie Chinn, of the University of Wisconsin (and also the blog Econbrowser), and Jeffry Frieden, of Harvard. In a new article in the Milken Institute Review, the two economists argue that if fiscal stimulus, quantitative easing and an alphabet-soup of mortgage relief programs haven’t been enough to kick-start the recovery, it’s time to try inflation.


The big factor holding back economic growth in both the U.S. and Europe, the two economists say, is debt: Consumers, companies and governments are all struggling under the burden of huge debts run up during the boom years, making it harder for them to spend, borrow and invest.


That diagnosis of the problem — they cite “This Time Is Different,” Carmen Reinhart and Kenneth Rogoff’s now-famous study of financial crises — is fairly mainstream at this point. But their prescription isn’t: Ease the burden on debtors by allowing inflation to rise.


“Raising the expected rate of inflation would reduce the real burden of debt on households, corporations and governments, spurring both investment and consumption,” Profs. Chinn and Frieden write, arguing the Fed should allow inflation to run “in the 4 to 6 percent range for several years.”


The authors recognize their proposal will likely be “met with howls of indignation” from creditors, who would see a policy of intentional inflation — which would reduce the value of their bonds — as an expropriation of their assets. “To an extent, they are right,” the economists say.


But one way or another, they continue, those debts aren’t going to be repaid in full, whether it’s through inflation, default, bankruptcy or negotiated settlements. Better to do it in a way that’s quick and, because it treats all debts equally, at least relatively fair. The logic is the same as in bankruptcy proceedings, they write: “For creditors, something is better than nothing; for debtors, relief is better than default; for both, certainty is better than uncertainty.”


Messrs. Chinn and Frieden join other prominent economists, including Mr. Rogoff and left-leaning economists such as Paul Krugman, in arguing for more inflation. But one important economist they don’t look likely to win over: Mr. Bernanke. In this week’s testimony, Mr. Bernanke left little doubt that he opposes raising the inflation target, even temporarily. (Mr. Bernanke has plenty of prominent backers for his position, too, including former chairman Paul Volcker.)


“I don’t think that’s a strategy that has a lot of support on the Federal Open Market Committee,” Mr. Bernanke said in response to a question from North Carolina Republican Patrick McHenry. Among other problems, Mr. Bernanke said, if the Fed raised its inflation target from 2% to 4%, businesses and households might reasonably wonder whether they could raise it again in the future. Such a loss of confidence in the Fed’s discipline could make it harder for the Fed to control inflation in the future.


Messrs. Chinn and Frieden argue that linking the inflation target to a specific unemployment rate would help keep inflation expectations in check. But given Mr. Bernanke’s comments — and given that even hinting at support for inflation amounts to political poison — they aren’t likely to see that theory put to the test anytime soon.



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FMI : la croissance mondiale est en danger

FMI : la croissance mondiale est en danger | Emerging Economies1 | Scoop.it
Le Fonds monétaire international revoit à la baisse ses prévisions de croissance 2012 et 2013 et presse la zone euro d'aller plus vite pour créer une «union bancaire et budgétaire».


Par Jean-Pierre Robin | publié le 16/07/2012


L'économie française ne progressera que de 0,3% en 2012 et de 0,8% en 2013, annonce le FMI dans ses nouvelles prévisions économiques mondiales, soit un repli de 0,2% chaque fois par rapport aux chiffres publiés en avril dernier.


Pour l'économie mondiale dans son ensemble, l'organisation financière internationale a revu également en baisse de 0,1% et 0,2% son pronostic, ramenant la croissance mondiale à 3,5% cette année et 3,9% l'an prochain.


Pratiquement tous les pays sont concernés, les États-Unis, la Chine et surtout l'Inde. Seule l'Allemagne fait exception, le FMI la créditant d'une croissance de 1% en 2012 au lieu de 0,6% prévu en avril.


Au-delà de ces rectifications chiffrées qui, dans l'ensemble, ne dépassent pas l'épaisseur du trait, le FMI tire la sonnette d'alarme. «Les risques de dégradation de ces perspectives restent très préoccupants», écrivent les experts.


Sans surprise, ils considèrent que «la priorité absolue est de résoudre la crise dans la zone euro». Ils enjoignent ses dirigeants «d'appliquer dans leur intégralité» les accords du Conseil européen des 28 et 29 juin, et en particulier la recapitalisation directe des banques par le MES (Mécanisme européen de stabilité).


Le FMI recommande d'aller plus vite dans la mise en œuvre «d'une union bancaire et budgétaire» en instaurant notamment «un système paneuropéen de garantie des dépôts».


Achat de dettes par la BCE

Sur le plan conjoncturel, «les risques de détérioration étant considérables», les pays qui ne sont pas sous la pression des marchés «doivent être prêts à appliquer des mesures budgétaires d'urgence», sans dire en quoi consisteraient ces mesures de soutien, ni les pays visés.


On songe bien sûr à l'Allemagne, dont le déficit public ne dépasserait pas 0,4% du PIB en 2013, la France se situant à 3,9% selon les experts internationaux qui sont dans l'attente de la loi de finances française pour 2013 visant un objectif de 3%. À cet égard, ils notent que «dans l'éventualité où la croissance décevrait, ces objectifs pourraient entraîner un ajustement structurel excessif».


De façon classique, le FMI réitère ses conseils d'assouplissement monétaire à la BCE, préconisant, entre autres, «la réactivation du programme de rachat d'obligations souveraines», interrompu depuis plus de trois mois.


Les États-Unis également suscitent l'inquiétude. «À court terme, le risque principal concerne la possibilité d'un durcissement excessif de la politique budgétaire, étant donné la récente impasse politique», s'inquiètent les experts du FMI.


Devant les «risques financiers intenses» qui se profilent, José Vinals, le conseiller financier du FMI, considère que «le moment est venu pour un leadership politique fort».

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China Firms Lose Out on Cotton Import Quotas - Sourcing Journal Online

China Firms Lose Out on Cotton Import Quotas - Sourcing Journal Online | Emerging Economies1 | Scoop.it
Import quotas for cheap, high quality foreign cotton are at a premium this year in China, as the government steps up pressure on textile manufacturers to use higher priced, lower quality domestic cotton.....
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How Americans see China

How Americans see China | Emerging Economies1 | Scoop.it
The Global Public Square is where you can make sense of the world every day with insights and explanations from CNN's Fareed Zakaria, leading journalists at TIME and CNN, and other international thinkers.


By Richard Wike and Bruce Stokes, Special to CNN 

September 18th, 2012

Editor’s note: Richard Wike is associate director of the Pew Global Attitudes Project. Bruce Stokes is director of Global Economic Attitudes at the Pew Research Center. The full survey results are available here. The views expressed are their own.

In meeting with Chinese President Hu Jintao two months ago, President Barack Obama said: “Over the last several years…we have been able to really create a new model for practical and constructive and comprehensive relations between our two countries.” By early July, on the campaign trail in Ohio, he was touting his administration’s record for bringing “trade cases against China at a faster pace than the previous administration.” This was underscored by the Obama administration’s September 17 unfair trade case at the World Trade Organization against alleged Chinese subsidies of auto parts exports.

Meanwhile, the president’s Republican challenger, Mitt Romney, has promised that on his first day in office he will issue an executive order branding China a currency manipulator, possibly triggering a trade war. However, in a Wall Street Journal op-ed on February 16, he stated that “a trade war with China is the last thing I want,” and then backed away from the threatened executive order by saying that he would designate Beijing a currency manipulator “unless China changes its ways.”

The casual observer might be excused if he or she concluded that the candidates were presenting a mixed message about the China policy they would pursue if they win in November. This paradox may simply reflect the candidates’ efforts to reconcile the imperatives of campaigning versus the constraints of governing when confronted with sharply contrasting views of China.

On the one hand, the candidates are attempting to woo voters worried about China’s rise. On the other, China experts are advising that whoever is elected president will one day have to deal constructively with Beijing.

Reconciling these often conflicting perspectives may prove one of the toughest foreign policy challenges facing the next U.S. president.

Most Americans describe relations between the U.S. and China as good, but most consider China a competitor rather than an enemy or partner, according to a new survey by the Pew Research Center.
Indeed, when asked which country represents the greatest danger to the U.S., more Americans volunteer China (26 percent) than name any other country, including Iran and North Korea. And about half (52 percent) view China’s emergence as a world power as a major threat to the U.S.

In particular, nearly eight in ten Americans say the large amount of U.S. debt that is held by China is a very serious problem for America; majorities also consider the loss of U.S. jobs to China (71 percent) and the U.S. trade deficit with China (61 percent) to be very serious.

But the public is also worried about China’s impact on the global environment (50 percent), cyber attacks from China (50 percent), China’s growing military power (49 percent) and China’s policies on human rights (48 percent) as major problems.

It is little wonder then that only 26 percent of the public say the U.S. can trust China.

Nevertheless, the public is divided on what to do about China: 28 percent want the next president to build a strong relationship with Beijing, 24 percent want him to be tough with China on economic and trade issues.

Obama and Romney are hearing a slightly different story from the foreign policy community, including government officials, retired military officers, business and trade leaders, scholars and the media, also surveyed by the Pew Research Center.

Like the general public, strong majorities of these experts, more than seven in ten, see China as a competitor rather than an enemy or partner.

Also, like the public, retired military officers are more likely to name China as the country that represents the greatest danger to the U.S. In contrast, Iran is cited more frequently by government officials, business and trade leaders and members of the news media.

But, for the most part, foreign affairs experts are far less concerned than the general public about issues related to China. Less than half of the retired military officers and less than a third of the other experts view China’s emergence as a world power as a major threat to the U.S.Fewer than four in ten say the loss of U.S. jobs to China, the U.S. trade deficit with China, China’s growing military power and China’s policies on human rights are very serious problems for the U.S.

Only cyber attacks from China are considered a very serious problem by at least half of the experts surveyed. Retired military officers are especially concerned.

Still, experts are not that much more trusting of Beijing than is the public. Only about a third or less say the U.S. can trust Beijing. However, they place a much higher priority on building a stronger relationship with China (62 percent versus 28 percent among the public).

The November 6 presidential election will not be determined by the candidates’ views on China. But given the public’s fairly hawkish views on China, both Obama and Romney will not shy away from sounding tough on Beijing. And, after election day, whoever is the next president is likely to hear more cautionary advice from foreign policy experts.

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World Bank Sees Long Crisis Effect

World Bank Sees Long Crisis Effect | Emerging Economies1 | Scoop.it

By SUDEEP REDDY | October 1, 2012,


WASHINGTON—The European debt crisis could weigh on the world economy for years, forcing policy makers to rethink their approaches to restoring growth and boosting job creation, the World Bank's new chief economist said in an interview Monday.

The global economy is "is not doing well," said Kaushik Basu, a former top Indian government official who on Monday became the bank's top economist. "The difficult phase will live with us for a while."


Europe's debt crisis is hurting demand on the Continent and hitting exports from developing countries. The market turmoil has also led trade financing to dry up, adding another layer of trouble to emerging-market economies that rely so heavily on selling their products abroad, Mr. Basu said. "Most people don't realize how much of trade is made possible by the oiling that is done by the financial system," he said. "You need trade credit. It's critical."


Real Time Economics


World Bank's Basu: Global Economy Faces 'Difficult Phase'
Mr. Basu, who is on leave from Cornell University, spent much of the past three years as chief economic adviser to the Indian government. Working there during what he called a "tumultuous period" for the country gave him a front-row seat to the problems of developing economies, which are the primary focus of the World Bank.


Countries such as Brazil, China and India are addressing homegrown problems in their domestic economies just as their overseas markets weaken, Mr. Basu said. "When you do that in a rush, yes, you're making some blunders as well."


Europe's crisis, meanwhile, is exposing fault lines in the construction of the euro currency system, Mr. Basu said. "It's a gigantic experiment. I think it's a wonderful experiment. We will have to bridge those fault lines and cure them. But we will have to live with problems for a while."


The global upheaval of recent years should force policy makers to re-evaluate how their policies affect other countries.

"The global economy is becoming one economy," Mr. Basu said. "We have to do a lot of rethinking. Globalization has come upon us more rapidly than we had anticipated."


The World Bank's major annual development report, released Monday night, found that 200 million people are unemployed and actively seeking work across the globe. About 620 million youth—most of them women—are neither working nor looking for work. Of the more than three billion people working world-wide, almost half are farmers or self-employed. The report highlights the importance of jobs as a driver for development around the world.


The forces that have unleashed cheap labor, pulling people out of poverty in developing countries, have created new tensions in advanced economies and "challenges that are absolutely huge," Mr. Basu said.


"One must not diminish the problems of industrialized-country labor as well, where they are suddenly coming under competition from a segment that earlier they did not have to think about," he said. "That restructuring whereby industrialized country labor has to be employed in different ways needs a lot of thinking."

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China: Lifting All Boats

China: Lifting All Boats | Emerging Economies1 | Scoop.it


Homi Kharas, Кристина Кудлаенко


China's economic juggernaut has forced the world to make room. For rich nations, it's just a matter of adjusting their economic strategies. But how is China's rise affecting poorer countries?


Governments in Asia, Latin America, and Central and Eastern Europe watch the Chinese export machine and worry about keeping their manufacturing jobs at home. The anxiety is understandable, but a closer look suggests that China's success will help, not hurt, most developing countries. The power of its economy-and the power of its example-will advance the fight against poverty.


Today, China has a lock on a large portion of the export market in North America, Europe, and elsewhere-markets that poor countries covet. This situation would spell trouble for many, but for the fact that China has also become one of the developing world's best customers. Forty-five percent of China's $400 billion in annual imports comes from developing countries, and these imports rose by $55 billion in 2003. Indeed, China runs a trade deficit with the developing world. Chinese demand for basic commodities (produced primarily in poorer countries) is so strong that it has pushed up prices for food staples and industrial raw materials such as aluminum, steel, copper, cotton, and rubber. For the millions of farmers around the world who depend on revenue from these products, the global price boom has come at just the right time, reversing decades of slumping prices.


China has also become the center of a virtuous regional trade cycle that benefits Asia's developing countries. True, China sucks up vast quantities of raw materials, but four fifths of its imports are now manufactured goods, including office machines, telecorn equipment, and electrical machinery. Neighboring countries are feeding the trade boom by exporting components and machine parts to China for final assembly. Korea and Taiwan have benefited the most, but the Philippines, Thailand, and Indonesia saw their annual exports to China shoot up by roughly 30 percent last year. Other regional production networks are developing, notably in automobiles and garments, so the gains from this trade will probably endure even if one sector lags.


China's economic impact is powerful. But so too is its example. The country has become a showcase of what open markets can achieve. It is reinvigorating the debate on how trade can reduce global poverty. China already has a large agricultural sector relatively undistorted by the types of subsidies and tariffs found in the United States or Europe. Its freetrade credentials will only grow as it complies with increasingly stringent World Trade Organization (WTO) commitments. Global quotas on textiles and clothing, for example, disappeared on Jan. 1, 2005. If economic liberalization allowed China to post 9 percent growth over three decades and lift 300 million people from poverty during that time, then surely other countries can make significant gains by knocking down barriers.


The standard excuses for poor development performance-an uneven global playing field and exploitation by foreign investorslose credibility when set against China's record. And there are signs that the lesson is taking hold. China's example was likely an important catalyst in India's reforms and growth surge during the last decade.


Latin American countries are starting to take notice: Chile and China are contemplating a free trade agreement, and Mexico and Brazil are sending high-level trade and investment missions to China. As China engages in free trade agreements with neighboring countries, Southeast Asia is likely to benefit even more.

During its communist heyday, Beijing often championed the cause of the developing world, at least in its rhetoric. Now, as a large, successful trader, China is in a far better position to put meaning behind its message, shaping the rules in the WTO and other international bodies to address development concerns. China is already active in the Group of 20, a forum in which rich countries and the largest developing countries exchange views. In many cases, China's interests coincide with those of other developing countries, many of which look to China for support. For example, China wants to promote freer global trade in agriculture, a key concern of poorer countries. China might also add its voice to the chorus of developing countries that seek safeguards for their service sectors.


Of course, China's rise does come at a cost for some. Those poor countries that rely on commodity imports take a hit as China's demand pushes up prices. China is such an efficient producer of garments that it will likely dominate textile markets, now that the global system of quotas has disappeared. That scenario will hurt garment workers in such countries as Bangladesh and Cambodia, whose jobs and wages depend on protected markets. Maquiladora industries in Central America that export to the United States under preferential agreements are already exiting the market, fearing the coming competition with China. Similarly, the advantages conveyed to some of the world's poorest countries through free-market access agreements with the United States and Europe will decline, as global trade barriers come down and efficient producers such as China begin to compete. Still, the benefits of China's economic rise, and of a more liberal and fairer global trading systern, outweigh the costs.


Decades ago, Japan, Germany, and South Korea showed the world how to develop with a strategy based on exporting manufactured goods. China's rise may offer an equally compelling example of how open economies can spur rapid growth. For the developing world, it's something to emulate, not fear.

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China: Options Open on Economy

China: Options Open on Economy | Emerging Economies1 | Scoop.it
For all the angst about its fading growth, the Chinese government has room to stimulate the economy through fiscal and monetary policies.


By ESWAR S. PRASAD | Published: September 10, 2012

China’s economy has been the leading contributor to global growth since 2009 and became the second largest in the world in 2010. Small wonder that fears of a growth slowdown in China are causing trepidation around the world.


The fears are palpable given that virtually all indicators of economic activity are pointing down. Growth in gross domestic product, industrial production and retail sales have all slowed markedly. Alternative indicators like electricity consumption suggest an even sharper slowdown. Foreign trade has not helped, with export and import growth falling sharply as well.


Then there are the longer-term concerns that a rapidly aging population is going to limit the economy’s growth potential, snaring China in the “middle-income trap.” With fear in the air, foreign capital is no longer pouring into China and some domestic investors are even taking capital out.


Inflation has eased to 2 percent and some of the froth has come off the property market, but these are seen by many as signs of deeper malaise rather than as positive developments. All told, it appears to be the season for China bears, who are exulting as their views appear — finally — to be validated.


The burden of pulling along world growth while the major advanced economies — the United States, Europe and Japan — continue to post anemic growth and remain in a state of policy paralysis has clearly taken its toll on the Chinese economy. Moreover, many emerging markets and even some advanced economies that rely on commodity exports have been riding on China’s coattails during a difficult period in the world economy. Thus, China’s growth is seen as a bellwether of an even rockier period ahead for a global economy whose recovery has stalled.


For all the angst about China’s growth, the government does have room to stimulate the economy through fiscal and monetary policies. This is in contrast to many advanced economies, which seem to have exhausted their policy options. With a leadership transition looming, the Chinese government appears to be holding some of its fire to be able to respond strongly to external shocks.

Attaining this year’s growth target of 7.5 percent is likely to be difficult but not insurmountable. The real challenge Chinese policy makers face is how to sustain growth in the short run without creating more risks over the longer term.


A bank-financed investment surge lifted economic growth during the global financial crisis. The temptation to use this policy tool again is strong. But another wave of bank-financed investment would also create big risks, including excess capacity in many industries and more bad loans in the banking system.


The mix of policies also has implications for making growth more balanced. Until recently, the Chinese economy was beset by two imbalances — an external one, reflected in a high trade surplus, and an internal imbalance, reflected in a low and falling ratio of private consumption to G.D.P.


The external imbalance has dissipated, at least temporarily. China’s trade surplus has fallen steadily from its recent peak of 7.6 percent in 2007 to 2.1 percent in 2011, and below 2 percent in the first half of this year. Part of this decline is because China has been growing far more strongly than its trading partners. Another factor is that the currency, the renminbi, has appreciated in value against the currencies of China’s major trading partners, reducing export competitiveness.


By contrast, domestic growth remains unbalanced, with investment still accounting for a major share of G.D.P. growth. The share of private consumption in G.D.P., which is only about one-third — already much lower than in virtually every other economy — continues to decline.


There was a spark of hope in the first quarter of 2012, when private consumption accounted for the major share of G.D.P. growth. But this proved fleeting, and investment has once again taken over as the main driver of growth. Investment-led growth of the sort China has experienced is not entirely a plus — it does not lift employment growth by much, has deleterious environmental consequences and limits the benefits that the average household gets from fast growth.

What is to be done? Fiscal policy, if well targeted, would be a better tool to stoke demand in the short run without creating too many long-term risks. For instance, a better safety net would help spread the benefits of China’s strong economic performance more evenly and reduce the incentives for households to “self-insure” against risks of unemployment by saving more. Raising social expenditures on health and education would not only give households more incentive to spend rather than save but also help improve the productivity of labor.


For the longer term, the main priority for the government is to improve productivity rather than rely on high investment or an expanding labor force. This will also require a better financial system and more effective policy tools.


The financial system needs to improve its efficiency in allocating capital to more productive uses, including providing capital for small and midsize enterprises that could generate more employment, and providing savers with a higher return on their deposits. A better monetary policy would help in this objective and that, in turn, requires a greater freeing up of the exchange rate over time so that the central bank can use interest rates to guide credit allocation.

The economy faces other enormous challenges, including corruption and dismal corporate governance at Chinese enterprises. The twelfth five-year plan, issued last year, laid bare these problems and deficiencies in the policy-making process. An authoritarian government can certainly do what would be infeasible in a democracy, where such an admission would be politically fatal. But it is difficult to think of another government, democratic or not, that so bluntly acknowledges major problems and areas where its policies have failed to deliver much progress. In the midst of the gloom, that allows a glimmer of hope that Chinese policy makers will continue to embrace an agenda of much-needed reforms.


Despite the difficult economic environment and a looming, rockier-than-anticipated political transition, there has been progress. This includes modest but significant steps taken in recent months toward greater flexibility of the renminbi’s exchange rate, liberalization of domestic interest rates, and freeing up of restrictions on capital inflows and outflows.


This opportunistic and gradual approach to economic overhauls is one way to make progress given the significant constraints, both political and institutional, that the government faces. But China’s leaders may not have the luxury of time or a benign environment, either domestic or global, to limit themselves to such a slow, even if steady, pace.


The country’s policy makers have proven adept at managing a high-wire balancing act for a number of years, keeping growth strong even while managing the many problems the growth process has created. Gusting winds from abroad have now exposed many of these tensions and threaten to bring the act crashing down.


A more aggressive push for reforms is needed to help secure short-term growth while improving future prospects and reducing risks. Not moving forward on these reforms may be the biggest risk of all.


Eswar S. Prasad is a professor at the Dyson School of Applied Economics and Management of Cornell University and a senior fellow at the Brookings Institution. He is a former head of the China Division of the International Monetary Fund.

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Le FMI appelle la Chine à faire de la relance

Le FMI appelle la Chine à faire de la relance | Emerging Economies1 | Scoop.it

Par Arnaud de La Grange | publié le 31/01/2012

La Banque centrale chinoise n'a pas voulu assouplir sa politique monétaire.


Si l'Europe devait s'enfoncer dans la crise, le salut devra venir de Chine. D'où l'appel du FMI à Pékin, l'encourageant dans des mesures de relance. Pour le directeur Asie du FMI «il y a de la place pour une relance budgétaire» en Chine, ainsi que dans un certain nombre d'autres économies asiatiques et émergentes.


À Washington, lundi, Anoop Singh, a estimé que «le rythme du rééquilibrage des comptes publics pourrait certainement être ralenti dans beaucoup d'économies qui ont de faibles niveaux de dette publique, telle la Chine bien sûr». Il a rappelé que le FMI prévoyait une croissance de 8,2% pour la Chine cette année, et n'envisageait pas «d'atterrissage brutal».


Le 12e plan quinquennal

En 2008-2009, Pékin avait mis en place un plan de relance spectaculaire de 400 milliards d'euros. De cela, cette fois-ci, il n'est apparemment pas question. Anoop Singh a rappelé que les Chinois avaient déjà mis en place des outils efficaces de relance, dans leur 12e plan quinquennal (2011-2015). Il a cité les aides à la consommation des ménages, l'amélioration de la protection sociale et les logements sociaux. Avec l'idée de se concentrer sur la croissance de la consommation intérieure plutôt que d'avoir massivement recours à l'investissement.


En 2009, Pékin avait largement ouvert les vannes du crédit, pour financer la construction d'autoroutes, de lignes de TGV ou des programmes immobiliers. Des mesures créant efficacement de la croissance, mais aussi générateur d'inflation, d'une bulle immobilière et de «mauvaises dettes».


Pas de baisse de taux

Les dettes accumulées par les fameuses «plates-formes de financement» des collectivités locales se montent officiellement à 10 700 milliards de yuans (1150 milliards d'euros). Mais ce chiffre serait sous-estimé de 3500 milliards de yuans, d'après l'agence Moody's. Et si le bureau national d'audit vient de faire savoir qu'il avait détecté 530 milliards de yuans d'irrégularités, les experts estiment les prêts douteux à 4 ou 5 fois plus.


Sur ce point, le premier ministre Wen Jiabao a voulu rassurer. Le Quotidien du Peuple a publié lundi ses propos, assurant que «la dette publique est globalement sûre et maîtrisable». Il a aussi affirmé que les financements de projets de chantiers publics seront assurés. Mardi, Wen Jiabao a encore déclaré qu'il continuerait à faire ralentir la hausse de l'immobilier, malgré des signes de refroidissement de ce marché. Un signal qui ne réjouit pas les investisseurs. La veille, en Chine, les marchés avaient rouvert à la baisse, après la semaine de vacances du Nouvel An chinois. Une morosité notamment alimentée par des chiffres de fort ralentissement des transactions immobilières à Pékin, Shanghai, Canton et Shenzhen. Une baisse de 66 % par rapport à la même période de l'année précédente. Les ventes au détail ont également faibli.


Et surtout, la Banque centrale chinoise n'a pas procédé à une nouvelle baisse du ratio de réserves obligatoires des banques, comme attendu. Montrant ainsi que Pékin n'est pas disposé à assouplir trop rapidement sa politique monétaire.

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Les Brics, locomotive de la croissance

Les Brics, locomotive de la croissance | Emerging Economies1 | Scoop.it

Par Arnaud Rodier | publié le 01/03/2012


Avec un PIB de 14 milliards de dollars, ils comptent pour 18% du PIB mondial.


Le prochain som­­­met des Brics à New Delhi, les 28 et 29 mars prochain, promet d'être suivi de très près par le reste du monde. Sécurité alimentaire, énergie, développement, crise financière internationale, le Brésil, la Russie, l'Inde, la Chine et l'Afrique du Sud ont un menu chargé. Et dès hier, le ministre des Affaires étrangères chinois a rencontré son homologue indien pour s'y préparer.


Avec un produit intérieur brut (PIB) de près de 14 milliards de dollars, ce groupe de pays, qui compte pour 18% du PIB de la planète, s'affirme de plus en plus comme le moteur de la croissance mondiale. L'an dernier, le seul commerce interne aux Brics a atteint 230 milliards de dollars, soit 8% du commerce de la planète tout entière.


«D'ici à 2016, ils compteront pour 37% de la croissance» du globe, prédit le dernier rapport économique de Grant Thornton. Le groupe international d'audit et de conseil, qui a interrogé 350 chefs d'entreprise dans les pays concernés, exception faite de l'Afrique du Sud, estime que les hommes d'affaire y sont «beaucoup plus optimistes» que dans le reste du monde. Ainsi 72% d'entre eux pré­voient une hausse de leur activité dans les douze mois à venir, contre 37% pour les pays du G7. De même, 45% d'entre eux se préparent à embaucher et ils sont 47% à envisager d'augmenter leurs investissements, contre 17% dans les États du G7.


Réclamer un vrai pouvoir

Bien sûr, ils vont connaître inévitablement des problèmes: exportations de pétrole pour la Russie, monnaie trop forte pour le Brésil, bulle immobilière pour la Chine et corruption pour l'Inde. Mais, globalement, ils pèseront de plus en plus lourd, insiste Grant Thornton.


À Mexico, fin février, en marge du sommet des ministres de Finances, les Brics ont discuté de la création d'une banque multilatérale pour financer leurs grands projets. Ils en reparleront à New Delhi. Tout comme ils vont remettre sur la table le rôle qu'ils entendent tenir dans la crise de la zone euro. Le ministre brésilien des Finances ne laisse guère de place au doute. Les pays émergents «apporteront plus de ressources au FMI une fois que les Européens auront renforcé leur propre pare-feu», a-t-il affirmé.

Ces pays émergents ne se privent pas non plus, alors que le mandat de l'Américain Robert Zoellick à la tête de la Banque mondiale va prendre fin en juin, de rejeter publiquement le principe selon lequel la présidence de cet organisme doive revenir de facto aux États-Unis.


Mais s'ils songent à présenter leur propre candidature, force est de reconnaître qu'ils n'ont pas de candidat. Ils le savent. C'est pourquoi, faute de pouvoir briguer la tête de la banque, les Brics sont plus que jamais décidés à profiter de ce renouvellement pour réclamer haut et fort un vrai pouvoir élargi dans les grandes instances internationales.

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Banque mondiale : pas de candidat US?

Banque mondiale : pas de candidat US? | Emerging Economies1 | Scoop.it

publié le 17/03/2012 


Les Etats-Unis peinent à désigner leur candidat à tête de la Banque mondiale au point qu'ils pourraient ne pas avoir choisi avant la date limite de dépôt des candidatures fixée au 23 mars, selon des informations obtenues par l'AFP de sources concordantes. Washington a présélectionné récemment trois candidats potentiels pour succéder à l'Américain Robert Zoellick, qui doit abandonner ses fonctions le 30 juin. Cependant, une source officielle américaine a reconnu implicitement les difficultés du gouvernement à arrêter son choix, laissant entendre que les Etats-Unis pourraient ne pas être prêts à temps.


Les trois noms retenus par le gouvernement de Barack Obama sont ceux de Susan Rice, ambassadeur des Etats-Unis à l'ONU, du sénateur démocrate John Kerry, candidat malheureux à la Maison Blanche en 2004, et de l'ancien secrétaire au Trésor Lawrence Summers. Mais on est actuellement "dans une situation d'impasse", a indiqué une source proche de la Banque mondiale.

En année d'élection, les Américains "ne sont pas si à l'aise à l'idée de lâcher Kerry", qui joue un rôle-clef au Sénat, "Rice tient la corde pour [succéder à Hillary Clinton au] Département d'Etat (...) et donc ils n'ont tout simplement pas de candidat à ce stade pour la Banque", indique cette personne. En effet, "Summers, c'est une vrai provocation pour les pays émergents", et les pays du G7 ne montrent "pas un grand enthousiasme" pour lui, "en tout cas certains, clairement, ne sont pas à l'aise" avec son éventuelle candidature, ajoute la même source.


En raison d'une polémique remontant à son passage comme économiste en chef de la Banque mondiale au début de la décennie 1990, M. Summers est très mal vu des Africains. Sollicité par l'AFP pour commenter ces informations, le Trésor américain a refusé de s'exprimer.


En vertu d'un accord tacite entre l'Europe et les Etats-Unis, la présidence de la Banque a toujours échu à un Américain tandis que celle du Fonds monétaire international (FMI) revenait à un Européen. L'élu de l'Amérique doit cependant être capable de susciter un large accord au conseil d'admnistration de la Banque, où sont représentés les 187 pays membres de l'institution.


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Mexico: Failed state or economic giant?

Mexico: Failed state or economic giant? | Emerging Economies1 | Scoop.it

02 Sep 2012


As Mexico's drug war rages, we ask if the new government can end the violence and steer a democratic path to prosperity.


Kidnappings, torture and beheadings - the so-called war on drugs has ravaged Mexico for years. With 60,000 dead, and counting, some say that America’s southern neighbour is on the verge of becoming a failed state.


But as record foreign direct investment pours into the country and the economy keeps growing, there is also another side to Mexico.

In this country, headlines about the world’s richest man, becoming a top ten global economy and being the seventh largest oil producer compete with grisly news of journalists killed or dead bodies dumped from Ciudad Juarez to Acapulco.


The drug cartels have become so powerful that they kill with impunity and corrupt the government that is trying to fight them, laying bare the limits of the state's power. Meanwhile, half of the population lives below the poverty line, many of them in fear of their lives. The US-sponsored 'war on drugs' has been declared in many quarters a total failure.


As a new Mexican president gets ready to take office, which version of this country will prevail?


Will the new government end the killings and steer a democratic path to prosperity? How will the US react to increasing violence along its southern border? And will Mexico take its place at the top table of nations?


Joining us in The Café in Mexico City are guests:


♦Senator Manuel Camacho Solis, a former mayor of Mexico City and a former foreign minister. He was one of the founders of the PRD, the left wing alliance that is now the main opposition, and is a critic of the 'war on drugs'.


♦Ana Maria Salazar, a well-known security expert, Mexican journalist and TV host. She was an advisor to the White House on the drugs war, and believes it is imperative that Mexico carries on its fight against the cartels.


♦Julian Lebaron, a farmer from Northern Mexico who turned activist after his brother and several members of his family were murdered by drug traffickers. He is one of the main figures of the movement for peace. Julian believes that the government will not be able to stop the violence until individual Mexicans step forward and take responsibility.


♦Dr Arnulfo Valdivia, the foreign affairs coordinator for president-elect Enrique Peña Nieto. He maintains that his party, the PRI, which is preparing to take power in December, is no longer the authoritarian force it once was.


♦Jaime López-Aranda, the head of the National Information Centre of the outgoing PAN government. His agency is at the centre of all Mexican government branches involved in fighting crime and drug-trafficking. He believes that the war on drugs has made Mexico a safer place.


♦Leticia Floresmeyer, an outspoken university student, critic of the president-elect and one of the main organisers of the new youth movement that has rocked the country, "I am 132".


♦Elena Poniatowska, an author, activist and Mexican icon. She has been writing on social issues and women rights since the 1950s, and was tipped to become minister of culture had the left won this year's elections.

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Opinion: Why foreign aid still matters

Agrowing number of development economists, including yours truly, believe that cuts to foreignaid budgets, such as the ones recently made by the Canadian federal government, reflect a broader trend in the global economy, a trend that is producing the end of international development as we have known it.

Foreign aid from 14 of the 27 donor states in the Organization for Economic Cooperation and Development (OECD) was reduced in 2011-2012. Nevertheless, the cuts to both the Canadian International Development Agency (CIDA) and the International Development Research Center (IDRC) were such that Canada will soon find itself amongst the lower rungs of the international donor community — a significant development for a country that historically has been one of the worlds leaders in supporting global development and international co-operation.

And yet, there has been little public debate in Canada over these cuts to foreign aid. It would seem that an increased number of Canadians see aid as having been largely wasted and of little benefit to developing countries.

As in parts of the U.S. political and military establishments, there now seems to exist a prevalent view that international development is somehow equivalent to “nation building” — and that, as exemplified in Afghanistan, nation building doesn’t work.

Instead, we are advised that we ought to leave developing-country governments and their populations to their own devices; with others suggesting that they would be best assisted by Chinese investment and the magic of the free market.


If only it were that simple.

Development is not equivalent to winning a war, nor is aid the equivalent of military intervention. And yet, those asked to contribute to the public dialogue on international development are more often defence or security experts than development professionals or officials from developing countries, thereby contributing to a context in which international development and the instrument of aid falls quietly from the global agenda.

This is happening at a time when most analysts would agree that the defining challenges of 21st century international development are being driven by an historically unprecedented process of global transformation and uncertainty that includes:

- Geo-political shifts in power from the OECD economies to Asia, Latin American and the Caribbean and sub-Saharan Africa;

- Accelerated technological developments raising youth expectations globally; The emergence of a new global middle class, dramatically intensifying demand for the planet’s finite natural resources;

- Demographic changes in developed and emerging economies affecting prospects for future economic growth as well as the pattern of its distribution;

- And widening income gaps within and between countries.

A critical result of these transformations is that the very nature of international development is changing, as are the instruments needed to support it. New risks and opportunities are emerging as different economic powers assert themselves, and established economies find themselves in a relatively weakened state.

Some see these risks as nationally threatening, and respond to them with public policies such as increased defense spending, stronger controls on immigration, higher levels of trade protection, or the dismantling of environmental safeguards. Others see these risks as more threatening to the global commons — the environment, climate, international health, global financial flows, food security, fragile states and weapons proliferation; with today’s international institutions seen as ill-equipped to deal with these new order risks.

The established economies are looking more inward, while the emerging ones are reluctant to commit to existing global institutions so long as they feel inadequately represented.

And yet failure to contribute to foreign aid and to collective solutions will continue to produce widening income gaps, unrealized expectations among a volatile bulge in the number of young people, and a fraying of whatever social consensus has been created both at a national and international level. Fundamentalism of all sorts will continue to emerge and the prospect of economically, socially and environmentally sustainable development will become increasingly remote -- not the direction in which we as Canadians, nor we as global citizens, would want the world to move.

Since the Second World War, unprecedented progress in the human condition has been made, and through the efforts of governments, multilaterals, businesses, and NGOs, hundreds of millions of individuals have emerged from poverty and despair. But much work remains.

If our commitment to international development, foreign aid and the multilateral organizations that support it continues to waver, we not only risk undoing the great strides that we have already taken toward more responsible global development, but also creating an even more uncertain and unstable world.

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Bernanke's Q&A testimony to House panel

Bernanke's Q&A testimony to House panel | Emerging Economies1 | Scoop.it

WASHINGTON, July 18, 2012 (Reuters) - 


Below are highlights from the question and answer session of a House Financial Services Committee hearing on Wednesday with Federal Reserve Chairman Ben Bernanke testifying on monetary policy and the U.S. economy. Bernanke's prepared testimony was virtually identical to his presentation to the Senate Banking Committee on Tuesday.





"I recognize that some people would advocate that we set an inflation target at, say, 4 percent and maintain that for a number of years. I don't think first that we could do that without losing control of the inflation process. Secondly, I'm very skeptical that it would increase confidence among businesses and households that increase economic activity. I think it would create a lot of problems in financial markets as well. And so I don't think that's a strategy that has a lot of support on the Federal Open Market Committee."




"The Federal Reserve can only buy Treasuries and agencies, and moreover quantitative easing typically involves buying longer-term Treasuries and agencies in terms of bills, for example. So, there are finite amounts of that available and, moreover, beyond a certain point if the Federal Reserve owned too much it would greatly hurt market functioning which would have the result of reducing the efficacy of the policy. So, I wouldn't say that we're at that point yet, but ultimately there would be some limit to how much you can do."

"I don't have a number for you (on how close we are to that limit) but we still have some capacity at this point."




"The Federal Reserve Bank of New York made some recommendations for reform which have not been fully adopted. So one strategy would be to switch to a market based indicator. The Federal Reserve has not come out in favor of a specific one, but a number of possibilities include repo rates, the so-called OIS index and even potentially Treasury bill rates, for example. So there are a number of possible candidates."




When asked if NY Fed could fire a primary dealer, Bernanke said : "If there are questions raised about the integrity and competence about a primary dealer, yes, that could happen certainly."




"I don't think (the euro zone) is close to having a long-term solution that will solve the problem. Until they find those long-term solutions we are going to continue seeing period of financial market volatility."




"Monetary policy cannot do much about long-run growth, all we can try to do is to try to smooth out periods where the economy is depressed because of lack of demand. Because of the financial crisis, the economy has been slow to reach back to its potential and we are trying to provide additional support so that the recovery can bring the economy back to its potential. But in the medium and long term monetary policy cannot do anything to make the economy healthier or growth faster, except to keep inflation low, which are committed to doing."




When asked if inflation will be a problem when the economy recovers, Bernanke said:


"No it will not. We know how to reverse what we did, we know how to take the money out of the system, we know how to raise interest rates. So it will be a similar pattern to what we have seen in previous episodes where the Fed cut rates, provided support for the recovery and when the economy reached a point of take off, where it could support itself on its own, the Fed pulled back, took away the punch bowl. And we can do that and we will do that when the time comes."




"The term 'audit the Fed' is deceptive. The public thinks that auditing means checking the books, looking at the financial statements, making sure that you're not doing special deals, and that kind of thing. All of those things are (already) completely open."

"The one thing that I consider to be absolutely critical though about the bill is that it would eliminate the exemption for monetary policy and deliberations."


"The nightmare scenario I have is one in which some future Fed chairman would decide to raise the federal funds rate by 25 basis point, and somebody in this room would say, 'I don't like that decision. I want the GAO to go in and get all the records, get all the transcripts, get all the preparatory materials and give us an independent opinion on whether or not that was the right decision.' And I think that would have a chilling effect and would prevent the Fed from operating on an apolitical, independent basis that is so important and which experience shows is much more likely to lead to a low inflation, healthy currency kind of economy."




"There ought to be a more gradual approach. I'm not saying we shouldn't consolidate the budget but don't want it to happen all in one day."




"Concern has been raised, and I fully understand it and sympathize with it, that low interest rates penalize people who live off the interest earnings of their investments and their savings. My response is that if we are going to have good returns on investment and capital overall, we need a healthy economy. If we raise interest rates prematurely and cause the economy to go into recession, that's not going to be the environment where people can make a good return on their retirement funds or other investments."




"A gold standard doesn't imply stability in the prices of the goods and services that people buy every day, it implies a stability in the price of gold itself."




"At this point we don't see a double dip recession. We see continued moderate growth. But we are very committed to ensuring, or at least doing all we can to ensure, that we continue to make progress on the employment side. And we have stated that we are prepared to take action as needed to try to make sure that we see continued progress on employment."




"The collective impact of the tax increases and spending cuts together come something close to 5 percent of GDP, which if all hit at the same time would be very negative for growth. It is important to combine a more gradual approach with a longer term plan to address the sustainability (issue)."




"I would suggest that in looking at these issues you might want to go beyond the 10-year window, which is usually the basis for fiscal decisions, and at least consider implications of actions for an even longer horizon. It is very important for fiscal stability, for financial stability, for Congress to provide a credible plan for stabilizing our long-term fiscal situation as soon as possible."




"Inflation is low, in fact it's below our 2 percent target. So I think the dual mandate has served us well. We do have the ability to address both sides. That said, we will do whatever Congress tells us to do. Low inflation does contribute to healthy employment in the long-term, so they are complementary in that respect."




"I wouldn't want to rule out regulatory and tax factors in part of the uncertainty... It's possible that some of these regulations have some impact on the cost of credit but there have been a lot of analysis that suggests that the benefits in terms of reducing the risk of a financial crisis are extremely large and that whatever costs are involved are worthwhile."




"There is...one important exception to what the GAO is allowed to audit under current law, and that's specifically monetary policy deliberations and decisions. So what the Audit the Fed bill would do would be to eliminate the exemption for monetary policy deliberations and decisions from the GAO audit. So in effect what it would do is allow Congress for example to ask the GAO to audit a decision taken by the Fed about interest rates for example. Now that is very concerning because there's a lot of evidence that an independent central bank that makes decisions based strictly on economic considerations and not based on political pressure will deliver lower inflation and better economic results in the longer term."

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La croissance chinoise au plus bas depuis plus de trois ans

La croissance chinoise au plus bas depuis plus de trois ans | Emerging Economies1 | Scoop.it
Entre avril et juin derniers, la deuxième économie mondiale a toutefois progressé de 7,6%. La consommation intérieure se stabilise et les exportations ralentissent. Pékin ne prévoit pas de plan de relance.


Par Julie Desné | publié le 13/07/2012


Le ralentissement s'installe. Au deuxième trimestre, l'économie chinoise a progressé de 7,6% par rapport à la même période l'an dernier, contre 8,1% sur les trois premiers mois de l'année. La croissance chinoise a ainsi enregistré, entre avril et juin, son rythme le plus lent depuis le premier trimestre 2009. Sur les six premiers mois de l'année, sa croissance s'établit donc à 7,8%. Après six trimestres consécutifs de ralentissement, le pessimisme gagne un peu plus de terrain.


La deuxième économie mondiale pâtit d'une demande extérieure en baisse. Les exportations ont ainsi progressé de 9,2% au premier semestre, contre 24% sur les six premiers mois de 2011. Les machines chinoises tournent au ralenti. La production industrielle était en hausse de 9,5% le mois dernier, soit un peu moins qu'attendu. Les consommateurs chinois, qui devaient assurer le relais, ne sont pas au rendez-vous. Les ventes au détail ont progressé de 13,7% en juin, contre 13,8% en mai.


L'investissement, seul relais de croissance

La progression des investissements en capital fixe était de 20,4% le mois dernier. Mais les efforts menés par le gouvernement pour calmer la spéculation dans le secteur de l'immobilier portent progressivement leurs fruits et pourraient compromettre ce relais de croissance.


Le gouvernement a pour l'instant tenu bon contre l'adoption d'un nouveau plan de relance. Lors du dernier, décidé en 2008, 450 milliards d'euros avaient été injectés dans l'économie, mais cela avait créé de nombreuses distorsions, en fragilisant les banques dont les crédits ont explosé et en alimentant l'inflation avec une masse monétaire en circulation trop importante.


Le week-end dernier, les déclarations du premier ministre Wen Jiabao, qui estimait que l'économie subissait «une pression vers le bas considérable», trahissaient l'inquiétude croissante des autorités centrales.


Mais en fait de plan de relance, Pékin devrait surtout poursuivre un assouplissement de sa politique monétaire. Quelques jours avant la publication de l'indice des prix à la consommation, qui a ralenti à 2,2% en juin, contre 3% en mai, la banque centrale annonçait la semaine dernière une baisse surprise des taux d'intérêt. La deuxième en un mois. Et l'institution ne devrait pas s'arrêter là.

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