Special points to highlight in this issue:
• On February 5, the Year of the Pig begins. This is supposed to be a good year for making money, especially in the stock markets, and it may well turn out to be true, but only because the past year has been so miserable and Beijing may be thinking of ways to support the market (or, more appropriately, more effective ways than it has already tried).
• Two weeks ago Martin Wolf published a much-discussed article in the Financial Times arguing that “the future might not belong to China”. I would suggest that the argument is even stronger than he thinks, and that events in the past year seem to support very strongly the arguments we have made during the past decade about why China’s adjustment is likely to be extremely difficult, and at least as bad as that of its predecessors. Among other things this means that China’s share of the global economy is more likely to decline in the next decade or two than to rise.
• One of the reform proposals that seems to be getting the most traction in Beijing and abroad is the call for Beijing to expand fiscally by lowering taxes. For some reason this is widely believed to be a way to generate fiscal expansion without generating debt. This is simply false.
Now read on...
Register to sample a report