Asia in the fast lane?

In a piece, he wrote for ‘Project Syndicate’, Prof. Kaushik Basu, former Chief Economic Advisor to the Government of India made the following prediction:

in 50 years, I predict that the world economy is likely (though not guaranteed) to be thriving, with global GDP growing by as much as 20% per year, and income and consumption doubling every four years or so. [Link]

I am happy to take the other side of the bet, if there is one.

But more than that, what caught my eye was this:

From 1500 to 1820, according to data collected by the late Angus Maddison, the world’s annual growth rate was just 0.32%, with large sections of the world experiencing no growth at all….Industrial Revolution, which lifted average annual global growth to 2.25% from 1820 to 2003?

The Angus Maddison database at the website of Groningen Growth and Development Centre did not give me information for the year 1500. Second, it only gave me per capita GDP for individual countries and regions measured in 1990 PPP GK (Geary-Khamis) dollars. The Excel sheet I could download had information starting only from the year 1820 (see link above).

On that basis, world per capita GDP (1990 GK $) experienced a CAGR of 1.27% from 1820 to 2010. Asia’s number 1.26%. For the world, the pre-WW I (1820-1913) growth rate was 0.84% and post-WW I (1913-2010), including the war periods, the growth rate was 1.69%. Double.

For Asia, the difference is more striking. The comparable figures were 0.15% and 2.34%.

It gets even more interesting if one split the data into two periods, 1820-1950 and 1950-2010. For the world, the growth rate in per capita GDP (in 1990 GK $) for the first 130 years since 1820 was 0.84% per annum. For the next 60 years, it was 2.21%.

It is more striking for Asia. The comparable figures are 0.10% and 3.84% respectively. Amazing speed of growth and catch-up. Put it down to Japan and China, post-1950. Roughly, the first thirty years from 1950 was the story of Japan and the next thirty years, it has been the story of China. What comes next? Who comes next?

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Singapore weather and climate

Just caught up with the Singapore annual climate assessment reports of 2015 and 2016.

Highlights:

2015:

There has been a warming trend over Singapore over a number of decades. The
average rise is 0.25ºC per decade from 1948 to 2015. This is higher than the global
warming rate of 0.12ºC over a similar period (1951 to 2012).

(If one looked at figure 9 on page 7, we would notice that Singapore’s warming trend accelerated from the 1980s. Price to pay for ‘development’)

2015 was the joint warmest and 2nd driest year on record for Singapore. 2015 set new monthly records for the warmest July and December; and tied the records for warmest October and November.

For Singapore, 2015 tied with 1997 and 1998 as the warmest years on record. Eight of the ten warmest years in Singapore have occurred in the 21st century and all have occurred since 1997.

Increasing frequency of warm nights and decreasing frequency of cooler nights. In this regard, 2015 and 2016 were literally off the charts! (See figures 10A and 10B in 2015 and figures 13 and 14 in 2016).

Singapore has a tropical climate which is warm and humid, with abundant annual rainfall of about 2400mm. Generally, the eastern parts of Singapore receive less rainfall
compared to other parts of the island. (Damn!)

2016:

2016, with a mean annual temperature of 28.4°C, is Singapore’s warmest year on record since 1929. This is 0.1°C higher than the previous joint record set in the years 2015, 1998 and 1997. All months in 2016 recorded mean temperatures above the 1981-2010 climate normal. With on-going global warming, new record temperatures for Singapore are increasingly more likely. (Oh, well!)

Singapore’s temperature displays a stronger long-term warming beyond average global land temperature. Being a city state, Singapore has been impacted by other human activities influencing the local climate. For example, urbanization cannot be easily identified as it is not possible to measure what the temperature increase would be without the urbanisation effect which is contained within the station network observations. Thus, although greenhouse warming has contributed to the rise in temperature over Singapore, it does not account for all of the increase; urbanization has played a role in the warming over Singapore as well, as measured by MSS’ network of instruments. Most of the additional warming however (when compared to the global warming over land) appears to have occurred in the 1980s and early 1990s.

(One can have a day-long seminar or longer on the meaning and overall costs and benefits of economic growth, urbanisation, etc.).

Shame offensive

Neville Maxwell makes no attempt to hide his distaste for India. But, what is amusing is that he does not take into account contextual evidence of China’s behaviour towards other countries in the region, in the last several years.

See this brief from Singapore-based Institute of Southeast Asian Studies on the exclusion of the Thailand Prime Minister from the Belt and Road summit.

This story suggests that the standoff between India and China near the tri-border with Bhutan is more a pressure on India to accept changing realities. That is realistic, compared to the Maxwell story above. But, are the realities really changing?

Frankly, China’s economy is far from healthy. It is brittle and vulnerable. Big time. It is overestimating its strength and underestimating American resilience, in my view.

STCMA – 19 July 2017

(1) Shock rise in China’s shadow banking enrages Xi Jinping. Quite why it should be shocking is unclear to this blogger. The interesting tidbit in the story is this:

… the shadow banking nexus is bigger than all other regular activities of the lenders put together. Regulators had thought it was equivalent to 42% of on-balance sheet business at the end of 2015. They have revised this drastically, admitting that it reached 110% by the end of last year.

(2)  Have the Economic Constraints on China’s Geostrategic Ambitions diminished? That is an interesting question to ask. But, as Brad Setser note,s there is room to disagree with the author’s recommendations.

(3) Headlines that tell the story together. No need for lengthy analysis

China’s Xi orders debt crackdown for state-owned groups [Link]

Chinese purchases of overseas ports top USD20bn in past year [Link]

(4) Barry Eichengreen on the 20th anniversary of the Asian crisis:

… if the emergence of China signifies how much has changed, it is also a reminder of how much remains the same. China is still wedded to a model that prioritizes a target rate of growth, and it still relies on high investment to hit that target. The government maintains liquidity provision at whatever levels are needed to keep the economic engine humming, in a manner dangerously reminiscent of what Thailand was doing before its crisis.

Because China’s government relaxed restrictions on offshore borrowing faster than was prudent, Chinese enterprises with links to the government have high levels of foreign debt. And there is still a reluctance to let the currency float, something that would discourage Chinese firms from accumulating such large foreign-currency-denominated obligations.

China is now at the same point as its Southeast Asian neighbors 20 years ago: like them, it has outgrown its inherited growth model. We have to hope that Chinese leaders have studied the Asian crisis. Otherwise they are doomed to repeat it.

(5) The real Takeaways from the weekend meeting in China:

(i) Support the real economy
(ii) reduce lending costs for the real economy
(iii) relegating financial opening up and currency reforms to the backburner – no more liberalisation. Concern over capital flows dominates.

The rest is all smoke and mirrors.

(6) Singapore blinks. [Link]

(7) Bill Gates cautions Europe on its open door immigration policy. Good stuff from the man. Speaking the truth.

(8) China’s Growth masks Unresolved Debt and Real-Estate Problems. Who knew?

(9) California confronts solar power glut with novel marketplace

(10) Conviction of former President of Brazil. I think Brazil is doing a far better job of cleaning up its politics than many other countries, including the so-called developed countries.

There is a big tale in this story

Revisited Chris Balding’s Twitter handle after a while. Came across this gem. (Arrived at this through this tweet)

According to new research based on data obtained under a Freedom of Information request by Hasan Tevfik and Peter Liu, research analysts at Credit Suisse, foreigners are buying property at an annualised rate of $8 billion per annum, equating to 25% of new supply in New South Wales and 16% in Victoria in the past 12 months….

… The bombshell figures suggest that, along with local investors, the level of foreign investor activity in the housing markets has been a significant driver of the price growth of recent years, and the overwhelming majority — a staggering 80% in NSW — is coming from China.

Chinese buyers are evidently not having any problem in finding money to pay for the purchases even though Australian banks are not extending credit and that there are alleged capital controls imposed by China.

Now, if Australia were to impose restrictions on Chinese buying of Australian property, it would be dubbed anti-globalisation and anti-foreigner. But, that would be a perfectly legitimate response because this additional demand is making homes unaffordable for Australians. Now, if ordinary Australians therefore vote for a politician who clamps down foreign ownership of Australian property, would he necessarily be a reckless and dangerous demagogue?

Would commentators argue that such real estate bubbles and unaffordability are necessary evils for keeping the world open? How many ordinary people would subscribe to such a philosophical stance? How many ‘philosophers’ would take such a stance if they were personally affected?

America matters more

The header of a Bloomberg article runs as follows:

If Trump Hits China, Regional Demand Would Soften Blow in Asia [Link]

I think that is a bit of a stretch. Surely, China has become important to Asian economies and other emerging economies but the U.S. matters much more. Without the U.S., the world economy would not be the same. Important for the so-called Pundits to shed that delusion or illusion too. Not that they have a good record on that.

You do not have to believe me but just peruse the BIS Annual Report 2016 (Chapter 3 – page 56):

In contrast to the significant rise in exports destined for China, the share of
most countries’ exports to the United States has remained stable or declined a little
over the past 15 years (Graph III.6, bottom panel). Despite this, US demand is still
more important than China’s for most countries’ exports.[Emphasis mine]

Trade spillovers can also occur through a third country that imports intermediate
inputs used in the production of its own exports. As a result, for many advanced
and commodity-exporting EMEs the indirect impact of a reduction in US imports is
large relative to the direct effect (the blue bars are large relative to the red bars in
the bottom panel of Graph III.6). Spillovers from other major advanced economies
also remain important for both advanced and emerging market economies. [Link]