Post Tagged with: "China"

What will Trump say about Chinese manipulation at the SOTU address?

What will Trump say about Chinese manipulation at the SOTU address?

Tonight US President Donald Trump is due to give his first state of the union address. From a foreign policy perspective, the big item on the table is Russia. But from an economic perspective, the country we meed to be thinking about is China. Here’s why.

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The potential for military confrontation due to Trump’s foreign policy

A few weeks ago I was writing about a likely pivot away from China toward Russia in the Trump administration. And my conclusion was that a violent pivot created a lot of unknown unknowns – to use a Rumsfeld phrase. It is the uncertainty and unpredictability that is the biggest problem in my view. I was mostly talking about trade and the economy though. But given China’s latest statements about potential military confrontation, I wanted to follow up with some brief thoughts on the geopolitical side of things.

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Monetary offset, the strong dollar and China’s currency manipulation

Monetary offset, the strong dollar and China’s currency manipulation

With the Fed talking up the likelihood of three rate hikes in 2017 while other central banks are still in easing mode, the potential for a US dollar rout and a concomitant closing of the US trade deficit is pretty low. Therefore, given Donald Trump’s hawkish rhetoric on China, the potential that the US government labels China a currency manipulator for the first time since 1994 is high.

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Donald Trump the risk taker, trade war edition

Donald Trump the risk taker, trade war edition

This is a follow-up to yesterday’s post about Donald Trump and confirmation bias. But it’s going to be a different beast altogether because here’s where I am going to lay out my thinking about Trump and trade. Let me cut to the chase. I think there is a high likelihood that Trump starts a trade war with China. I’ve written about this before – twice! But now I want to outline some possible economic and geo-strategic outcomes based on this. Some of these outcomes are pretty good. But some are catastrophically bad.

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More on the coming trade war with China

More on the coming trade war with China

On Monday, I wrote a piece outlining how the US has pivoted away from China toward Russia. And the conclusion I drew from the circumstances was that this pivot will create a lot of geopolitical and economic uncertainty depending both on the importance of the actors on the world stage and the violence of the pivot. As US President Obama is constantly at pains to stress, Russia is not a major player economically. So the pivot toward Russia is one of geo-strategic importance. But the pivot away from China has economic implications. And China-hater Peter Navarro as Trump’s new trade czar is telling us the pivot will be violent.

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Policy divergence, the strong dollar and trade war with China

Policy divergence, the strong dollar and trade war with China

I have heard some commentators say that the concern over a strong dollar is overblown. I don’t think it is. In the context of heightened tensions with China, the strength of the US dollar will be a key issue affecting Asia in particular. I want to flesh out a few thoughts here, especially regarding the pivot by the US toward Russia and away from China.

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Tuning out political hysteria in the US

Ever since Donald Trump unexpectedly won the US presidential election, there has been an unending stream of anti-Trump tirades in the media. The emotions creating this wave of criticism make it difficult to have a reality-based view of the potential economic consequences of a Donald Trump presidency. So I am going to try to frame four issues of concern on an international level here that I think are relevant: Trump’s proximity to Russia, Trump’s proximity to big business, Trump’s hawkishness on China, and Trump’s hawkishness on Mexico.

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China: Choosing More Debt, More Unemployment, Or Transfers

China: Choosing More Debt, More Unemployment, Or Transfers

China’s success will depend on the extent to which Beijing in 2016 is able to centralize power, to begin to sell off government assets (probably local and provincial, and not central, government assets), to rein in credit growth, and to accept much lower GDP growth rates while keeping household income growth from dropping too sharply. If it cannot do this, China’s adjustment is likely to be much more difficult, much longer lasting, and perhaps much more disruptive.

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The titillating and terrifying collapse of the dollar. Again.

The titillating and terrifying collapse of the dollar. Again.

This post was originally published at China Financial Markets. By Michael Pettis Foreign perceptions about the Chinese economy are far more volatile than the economy itself, and are spread across a fantastic array of forecasts. On one extreme there are still many who hold the view that overwhelmingly dominated the consensus just four of five years ago, with a book […]

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The Importance of China’s New VAT

The Importance of China’s New VAT

Yesterday, China announced one of the most important tax reforms of the past twenty years. It is replacing a business tax on gross revenue for non-manufacturing companies with a VAT. Manufacturing companies have been subject to a VAT approach for a few years. The reform extends it from manufacturing and a few services in a pilot program to industry-wide application. It will now cover construction, real estate, finance and consumer services.

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Fed policy in an election year of slowing growth

Fed policy in an election year of slowing growth

US and global economic growth is slowing. And this has caught the Fed out given its rate hike in December. The question, now, therefore is whether the Fed continues to hike in the face of this slowing, given the election looming in November. I believe the window for hikes is so limited that the data in May and June will determine what happens for the rest of the year. Let me add some thoughts on these issues and on policy divergence below.

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How the Fed could cause recession in 2016

How the Fed could cause recession in 2016

The Fed began to tighten monetary policy in May 2013, when it announced its intention to taper large scale asset purchases. Despite Fed chair Janet Yellen’s recognition in recent testimony before Congress that financial conditions had become less favorable, her remarks demonstrate that the Fed is still tightening policy today. And because this policy stance is inappropriate for the stall speed US economy, the Fed is now at risk of tipping the economy into recession. Full commentary follows below.

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