It’s been sometime since my last posting, but overwhelming developments and trends in China have compelled me to set aside everything else to write down current observations. Tides are changing ever rapidly in our current times, and it may be a long time before we will be able to become too comfortable economically or politically.
Not surprisingly, the Hong Kong pro-democracy protests and slowdown of the Chinese economy are huge events with effects that reverberate around the world.
News of the Chinese inflation rate hitting a 5-year low in September, as well as the cooling property market is quite worrisome for not only the domestic Chinese economy, but global manufacturers and exporters of everything from commodities and building materials to luxury brands. I would have to agree that an economic environment, which stimulates such “creative” marketing initiatives as offering 1,000 live chickens to promote real estate sales, is sort of scary.
For the sake of the world economy, let’s hope that the Chinese government monetary and fiscal stimulus measures take effect soon. They appear to be making all the right moves with a 50 basis point quarterly reduction in bank reserve requirements projected over the next year, according to analysts at Nomura, as well as a central bank reduction in the 14 day repo rate signaling lower short term interest rates.
As for the Umbrella Revolution in Hong Kong, that is a bit trickier to predict the outcome, as well as the complicated motivations of the student protesters. As always, economic factors seem to raise their heads with local businesses lashing out at protesters as they are actually affecting sales.
Beijing appears to be wisely delaying any official government response, as it would be disastrous all the way around for China’s relations with the West if they were to send in PLA troops. Given the importance of Hong Kong as an intermediary for China’s trade, as well as its access to international capital, such confrontation would certainly have a negative economic impact.
While the acquisition of the world renown Waldorf Astoria in New York by the insurance group founded and chaired by the grandson-in-law of Deng Xiaoping, and the visual images of runners in the Beijing Marathon wearing gas masks to mitigate air pollution would not directly be connected with the economy or politics, nevertheless they are quite interesting observations.