CHINA’S latest batch of ugly data offers a stark message to President Xi Jinping: Whatever he’s doing to prop up growth isn’t working. Even worse than the 5.5-percent drop in exports last month was the 13.8-percent plunge in imports, indicating that domestic demand is weaker than the external sector.
A little over a year ago, Joko Widodo swept to power in Indonesia, promising bold change and higher living stands. Voters enthusiastically bought into his everyman image: He’s Indonesia’s first president with no ties to the military, the country’s dynastic families or its sprawling party machinery.
THIS week’s holiday to commemorate the end of World War II couldn’t have come at a better time. For a global financial system traumatized by recent gyrations in China, the closure of mainland markets is a chance to take a breath and remember that the world is most likely not on the verge of another crisis.
In recent years, China’s relationship with the US has resembled nothing so much as a hostage situation. Beijing’s enormous holdings of Treasuries gave it immense leverage over Washington, which lived in perpetual fear of China choosing to not finance any new debt, or sell off its current holdings.
Bank of Japan (BOJ) Governor Haruhiko Kuroda has a new strategy to support his country’s listing economy: talking up China’s.
THE finance secretary of the Philippines has a message for Asian policy-makers tempted to follow China’s lead by devaluing their currencies: Don’t do it. “We must be mindful of the trade-offs involved in using the exchange rate as a trade tool to boost competitiveness,” Cesar V. Purisima said on Sunday.
IF you think Federal Reserve (the Fed) Chair Janet Yellen is stressed, spare a thought for Agus Martowardojo. On Tuesday the governor of Indonesia’s central bank had to choose between cutting interest rates to support growth or hiking them to prop up his currency. He ultimately decided to split the difference and do nothing.
THERE’S a difference between bad economic news and the devastating variety that Japan received on Monday. Prime Minister Shinzo Abe might have been able to weather the second-quarter data showing a drop in Japanese consumption and a 1.6-percent decline in annualized growth. But it’s not clear his government can recover from the latest news about sputtering exports, which fell 4.4 percent from the previous quarter.
MALAYSIA’S ongoing currency crash has many causes: a worsening global outlook, plunging commodity prices and, of course, the political scandal enveloping Prime Minister Najib Razak. But the real culprit is the year 1997.
PANIC is in the air as China suffers its biggest one-day stock plunge since 2007. It shouldn’t be. The 8.5-percent slide in the Shanghai Composite Index is actually a development that could leave China better off eight years from now.
TOSHIBA’S CEO and two other top executives resigned after presiding over a $1.2-billion accounting scandal. Well and good, but when do we see some criminal indictments?
ASIAN leaders could be excused a degree of exasperation over the ongoing Greek mess. China’s slowdown and stock-market chaos are worry enough; the last thing the export-dependent region needs is a Europe in chaos. Worse, European leaders seem intent on misreading or ignoring lessons from Asia’s own brush with collapse.
THE international ratings agency Fitch was downplaying concerns on Thursday that Chinese stocks are a systemic risk to global markets. Many investors, however, are far less sanguine.
NOT so long ago, Hong Kong was regularly dismissed as a financial backwater—not just internationally, but even within China. Many pundits started writing the city’s obituary when Jack Ma, CEO of China’s e-commerce giant Alibaba, rejected listing his company in Hong Kong, in favor of New York. And as Shanghai’s stocks skyrocketed in recent months, it seemed to confirm Hong Kong’s obsolescence.
When the US sneezes, an old saying goes, the world catches a cold. That’s been nowhere more true than in Asia. But as China’s coughing fit grows louder, countries in the region are wondering whether their neighbor’s illness will also prove contagious.
CHINA’S financial world has officially entered the paranoia zone. As the Shanghai stock market experiences its worst three-week rout since 1992—in defiance of government efforts to reverse the plunge—government officials are blaming shadowy conspiracies for the sell-off.
SAMSUNG is giving South Korea’s National Pension Service an offer it can’t refuse: Support the nation’s biggest conglomerate in its fight against a foreign hedge fund, or else.
THE Japanese government’s newfound embrace of international corporate governance standards has the potential to be an epochal moment for the country’s economy. Shareholders are now being encouraged to challenge Japanese CEOs, and companies across the country find themselves under pressure to diversify their boards and increase accountability.
FOURTEEN years ago, Goldman Sachs presented a thesis that quickly gained traction among investors and policy- makers: Brazil, Russia, India and China (Bric), the bank claimed, would increasingly drive global growth, filling a void left by the West. Today the opposite case seems far more plausible. The so-called Bric nations are now threatening to drag down the rest of the world.
BILL GROSS of Janus Capital says his next great short trade may be Chinese stocks. With the Shenzhen and Shanghai markets up another 9 percent this week, it’s not hard to understand why. But the investment guru might want to consider betting against Hong Kong, too, given that city’s continued courting of high-volume traders from mainland China.
THERE are plenty of people in Asia who believe Haruhiko Kuroda, governor of the Bank of Japan (BOJ), lives in Neverland. At the very least, economists on both sides of Japan’s deflation debate—those who worry Kuroda has weakened the yen too much, and those who believe he hasn’t done enough—think his policies have been out of touch.
MANY observers assume that China is on a path to become the next Japan—a major economy mired in a multiyear deflationary funk that deflates its global clout. And it’s certainly true that the way that Beijing has been downplaying its debt problems is eerily reminiscent of Tokyo’s public-relations strategy from the 1990s.
COULD a lack of liquidity soon cause Asia’s stock markets to crash? That question might seem fanciful at first glance. Central banks in Frankfurt, London, Tokyo and Washington, by keeping policy rates near or below zero, have been responsible for the arrival of unprecedented waves of cash on Asian financial markets. It’s no accident that Shanghai stocks are up 137 percent over the last 12 months even as the Chinese economy has slowed; that the Nikkei stock exchange is up 41-percent surge even as deflation returns to Japan; and that South Korea’s Kospi index is near record highs even as that country’s exports are slumping.
Christine Lagarde’s people say China’s currency is no longer undervalued. Jacob Lew’s argue it still is. There’s a lot at stake in the debate: The yuan can’t gain status as a global currency reserve if China is thought to be manipulating its value. So who should we believe, the head of the International Monetary Fund (IMF) or the US treasury secretary?
EVERYONE’S long known that China’s stock market is a rigged, nontransparent mess. That’s a problem for Beijing certainly, but it’s also now a problem for Hong Kong, once considered the gold standard for global financial hubs.
THE dubious honor of triggering the largest consumer recall in US history—once held by Johnson & Johnson’s Tylenol—now belongs to the Japanese auto-parts supplier Takata. Thirty-four million of the company’s airbags, having been determined to have caused at least six deaths and injured more than 100, will have to be replaced. But it’s not too late to hope some good can come from this misfortune. Ideally, it will serve as a wake-up call for the Japanese government and the global auto industry.
ON May 19 I assigned somewhat disappointing grades to the would-be economic reformers of Asia’s three leading economies: India (B), Japan (C-) and China (C+).
ONE year ago, after Narendra Modi’s election as prime minister of India, I explored how Asia’s biggest economies were suddenly in the hands of leaders pledging huge economic reforms. Like Modi, Japan’s Shinzo Abe and China’s Xi Jinping were promising to deliver big changes. How have things fared since then for Asia’s “Axis of Reform”?
ZHOU XIAOCHUAN is governor of the People’s Bank of China (PBOC). But among some financial types, he’s earning another, less enviable title: the killer of weekends.
PRIME Minister Shinzo Abe has made it a priority to steer Japan toward better corporate-governance standards. Unfortunately, the nation’s most important company is heading the other way.
JAPAN has been conducting the most audacious monetary experiment in modern economic history, but there are plenty of signs the experiment has not been audacious enough. When Haruhiko Kuroda, governor of the Bank of Japan (BOJ), convenes the bank’s policy meeting this week, he will have to convince his colleagues that it’s time for another round of shock-and-awe.
THIS week, Kaisa, a former poster child of China’s booming real-estate market, made history by becoming the first Chinese developer to renege on dollar loans. The immediate causes of Kaisa’s default are clear enough: plunging property values left it with excessive debt.
ASIA has a China problem.
IT’S only April, but 2015 already seems to be the year of the Asian stock bubble. In addition to mainland China’s bubbly markets, the region is dealing with two other equity booms that don’t jibe with economic fundamentals.
CHINA’S Xi Jinping made a lot of grand promises over the weekend, pledging a new order where China and Chinese-led institutions, such as the new Asian Infrastructure Investment Bank (AIIB), would promote prosperity across the region. But he was on shaky ground—literally. The Boao Forum where Xi spoke took place in Haikou, capital of China’s island-province of Hainan, whose local government, it seems, may not be able to pay its debt this year.
FOR a leader facing a plethora of challenges at home, Philippine President Benigno Aquino is thinking a lot about Detroit—in particular, how to steal the title “Detroit of Asia” away from his Southeast Asian neighbor Thailand.
CHINESE investors are acting as giddy as Americans were on December 5, 1996, the day Alan Greenspan made his infamous “irrational exuberance” dig at markets. Don’t take my word for it.
HARUHIKO KURODA can now give his troubles a name: Toyota. It’s hard to draw a kinder conclusion as the company that’s benefited most from the central bank governor’s easing policies offers its 63,000 union employees a measly $33 per month pay hike.
CAN Asia beat the rising-dollar curse? The question is far from academic considering the central role that a strengthening US currency played in sparking the region’s 1997 crisis, as well as Latin America’s own financial woes a decade earlier. When the dollar slides, liquidity flows into emerging markets, pumping up growth and assets. As the dollar rallies, it can act like a gargantuan money magnet drawing much-needed investment away from the developing world.
TWO years after Haruhiko Kuroda, governor of the Bank of Japan, declared his team will “do whatever it can” to end deflation, it’s painfully clear their efforts aren’t working.
THE future of Sony, a $32-billion giant, may turn on $50,000. That’s how much a crowdfunding initiative, championed by CEO Kazuo Hirai, had raised, as of Thursday, for a new technology that seeks to empower would-be inventors. The project—the brainchild of Sony engineer Takehiro Hagiwara—is part of an improbable effort by the Japan Inc. icon to come up with the next Walkman.
OVER the weekend, China’s second rate move in three months made clear how concerned leaders in Beijing are about sliding growth. And Saturday’s quarter-percentage-point cut is probably only the beginning. As data on manufacturing, property and consumer prices take a dramatic turn toward contraction, there’s every reason to think China’s one-year deposit and lending rates—now 2.5 percent and 5.35 percent—could head toward zero, just as in neighboring Japan. After that, can quantitative easing (QE) with Chinese characteristics be far off?
FEW buzz phrases scare economists more than “new paradigm.” If such things existed, Japan would still dominate the world economy, risk would have been eliminated from Wall Street, and the euro would have spread boundless prosperity from Berlin to Athens.
THE exact moment of any corporate turnaround is almost impossible to pinpoint. But if Sony’s latest numbers truly do signal the revival of the Japanese icon—the company just posted its best quarterly profit in seven years—then the transformation may have begun last April, when Kenichiro Yoshida was promoted to CFO.
JACK Ma, 1. China, 0. That seems to be the score in the unusually public tussle between the Alibaba billionaire and Beijing.
RAGHURAM Rajan’s recent surprise rate cut was what central bankers call an “insurance move.” In a highly uncertain and deflationary world, the Reserve Bank of India governor decided he’d rather risk higher inflation in hopes of boosting growth. More quietly, Rajan is taking out another policy that could pay even bigger dividends in years to come. He’s hoarding dollars.
JAPAN has long been the world’s living laboratory for observing what happens when a large chunk of the population grows old. Now, it’s also a financial testing ground—demonstrating how a huge, developed economy will live without a bond market.
FOR China and India, 2015 should be a pivotal year. Both Chinese President Xi Jinping and Indian Prime Minister Narendra Modi have for months been making grand pronouncements about structural change, while moving only timidly to fulfill them. With oil dropping below $50 a barrel, some of the urgency to implement those painful reforms is sure to fade away. So, too, however, will the excuses for not acting.
BY restoring diplomatic ties with Cuba, Barack Obama clearly admitted that Washington’s five-decade-old strategy of isolating the Caribbean nation had failed. So why is the White House doubling down on a similar policy toward North Korea?
THE risk of what Nobel laureate Paul Krugman calls “Japanification”—a semi-permanent economic funk—has haunted China for at least a couple of years now. Last week a Bank of America Merrill Lynch report again asked, “Will China Repeat Japan’s Experience?”