The US magazine Foreign Policy recently ran an article titled “Hugo’s Banker” (meaning the late President Chavez of Venezuela) describing as the world’s most powerful banker Mr. Chen Yuan, the Chairman of China Development Bank (CDB). In what sense is this true? CDB is certainly very large – its total lending at the end of… Continue Reading
Category Archives: China
What is a sovereign wealth fund?
A sovereign wealth fund (SWF) is an organisation that manages financial and other assets on behalf of a government or nation. But what about the holdings of foreign exchange reserves by central banks? These assets, often much larger in size, are not regarded as SWFs. So what’s the difference? This question arose for me last… Continue Reading
Why I’ll be watching Japan in 2013
Every country is unique but some are more unique than others. Japan, though quite obviously not located in the geographic western hemisphere, is part of “the west” as a group of rich democracies with advanced economies. Its inclusion is not because it has any historic link to the west, unlike other eastern hemisphere economic success… Continue Reading
Chinese investment – too much of a good thing?
A key feature of macroeconomic analysis is the relationship between a country’s savings and investment rates. Savings represent income that is not consumed. Investment means spending on assets that will last for some period of time, such as factories, houses, cars and infrastructure. Savings are resources – you cannot invest if you don’t set aside… Continue Reading
China’s solar power sector in deep trouble
Last year a group of MFin students did a consulting project for a specialist energy investment firm, comparing the investment prospects for solar and wind power in China and India. They were very negative about the outlook for China, on the back of excess capacity and some quality problems with wind turbines. The client was… Continue Reading
China’s balance of payments: current and capital accounts now pulling in different directions
Every country’s economic relations with the rest of the world are summarised in the balance of payments. This is divided into the current account, which records the flows of trade and income, and the capital account, which records the flows of financial assets and liabilities. Usually countries have a deficit on one and a surplus… Continue Reading
Financial repression: China versus India
Financial repression is a term used by economists which means the government taking ordinary people’s savings to achieve some goal, typically to pay for the government itself, by exploiting imperfections in the financial system. It is an indirect form of a much more widespread process, that of governments (or the elites which control them) commanding… Continue Reading
Australia and the Dutch disease
Australia is often known as the lucky country. Not that all of its history has been lucky but in the last twenty years it has been one of the largest beneficiaries of fast Chinese economic growth. About a quarter of Australia’s exports go to China and its abundance of raw materials such as iron ore… Continue Reading
Internationalisation of the RMB: what does that mean?
A phrase that pops up regularly in Chinese financial and economic commentary is the internationalisation of the RMB (renminbi – the people’s currency). What does this actually mean? Internationalisation is not an official or recognised economics term but China uses it to convey what economists would term a move to currency “full convertibility”. What does… Continue Reading
Dragon ladies
The myth of the scheming woman is one that pops up in many cultures. In the UK, for example, we talk of Lady Macbeth when we want to describe a devious woman who is held responsible for a hapless mere man’s crimes and downfall. This entertaining article in Foreign Affairs gives the Chinese example of the… Continue Reading
Letter from DC
It has been a long time since I walked the streets of the United States capital. Like Cambridge, much remains unchanged, but there are some telling alterations. I thought it was a sign of the times that on K street, the home of the political lobbying industry, you can now buy a copy of the… Continue Reading
Poverty, aid and the flaw of averages
In recent years there has been a fierce debate about the effectiveness of foreign aid, with opponents such as William Easterly arguing that most is wasted and that it often props up regimes that harm their population’s long term future. Aid, or ODA (official development assistance), is still given by most rich countries, which claim… Continue Reading
Chinese real estate really is in trouble
In case there hasn’t been enough bad news for you recently ($2bn loss at supposedly the world’s best managed bank, Greece heading for financial collapse, the UK back in recession, stubbornly weak employment data in the US) the evidence is growing of a serious property downturn in China. This blog brings together the data to show… Continue Reading
The Chinese (banks) are coming
Last week, amid all the fuss about the French and Greek elections, the Federal Reserve Board approved the acquisition by the world’s largest bank by value, ICBC (Industrial and Commercial Bank of China), of a majority stake in the Bank of East Asia’s US banking business. ICBC, together with its parent organisations CIC (China Investment Corporation) and… Continue Reading
Some new book recommendations (1): Why Nations Fail
Daron Acemoglu and James Robinson: “Why Nations Fail“ There have been many fascinating books in the last couple of decades on the big question of why some countries are rich and others poor, and the persistence of inequality over decades, even centuries. Jared Diamond’s “Guns, Germs and Steel” and David Landes’ “The Wealth and Poverty… Continue Reading