Hey wait a minute–that’s 5AM here in California! I get to wake up in the dark again. We will discuss the China GDP number that will come out tonight. Here is an outline of the talking points I will use for the spot. -I expect tonight’s number will be a little over 8% -China is slowing but not dramatically (8-8.5% GDP growth this year.) -Policy is easing in China but gradually. The reserve requirement cuts are not monetary easing; the PBOC uses the tool to manage speculative flows. When currency speculators increase their bets that the RMB will rise against the dollar, the money flows into the banks so the PBOC raises reserve requirements to effectively “sterilize it”, i.e., to keep it from showing up as increases... [Read more]
FYI: I will be on CNBC’s Fast Money Monday from noon-1PM EAstern time to discuss the China growth news released this weekend. As you know, many people are worried about a hard landing for the Chinese economy. The March PMI, released today, should help them exhale. The National Bureau of Statistics said on Sunday China’s official Purchasing Managers’ Index (PMI) jumped to an 11-month high of 53.1 in March from 51 in February, beating analyst forecasts of 50.5. My take: China is slowing some, maybe from 9.2% last year to 8-8.5% this year, but don’t hold your breath for a crash. I expect more gains in dollar-based security markets, including China, for the remainder of this year as the tsunami of liquidity created by the... [Read more]
I did a spot today on CNBC’s FastMoney where the topic was reports of declining China growth. Here are the talking points I used to brief the anchors for the spot FYI. China is slowing somewhat this year due to -weak growth in Europe (China’s biggest trading partner and -shrinking property market (residential property prices falling in all major markets) -policy is also pushing fixed asset investment spending down, consumer spending up as a way of changing the structure of the economy over time -Western observers are making too much of the slowdown. When they do, they sell China stocks. Slowdown will be modest, from 9% last year to 8-8.5% this year. Reasons: -income growth is strong in cities, even stronger in rural areas -government... [Read more]
FYI: I will do a spot on CNBC’s Kudlow & Company tonight at either 7:30PM Eastern time or 4:30PM Pacific time. The topic will be US/China trade. As you may have seen, the US, EU, and Japan filed a complaint today with the WTO alleging that China is restricting its exports of rare earth minerals (tungsten, molybdenum, etc.), which was quickly followed by tribal chest-thumping contest by both Obama and Romney. Wait, somebody wants China to export MORE of something? I will try to interject a little logic into this emotional topic tonight. Hope you can tune in. JR PS: Here is the link to the CNBC video of the spot. Read More →
I wrote an op-ed for the Christian Science Monitor a few days ago on US/China relations. You can read it by clicking here. It deals with the question of when China’s GDP will exceed US GDP. My point is that the answer depends on us. Can we stay ahead of China? Yes! But it will depend on America’s political will to fix its own problems, rather than blaming them on China. I was approached by a man at the supermarket who penetrated my Southern California disguise of baggy shorts, T-shirt, and deck shoes with no socks and asked if I was me? (Yes); the one who talked about China on CNBC? (Yes); then the question I hear all the time, “Are the Chinese going to let us to stay rich?” He is onto something. Whether we stay rich and powerful... [Read more]
(June 14, 2011) Last week I had the pleasure of participating in a public forum hosted by the Common Ground Committee in Darien CT. You can watch a video of the forum at the Common Ground Committee’s website. The thesis of the forum is to explore a controversial topic and look for common ground–areas where both sides can agree–to use as a basis for building a solution. Our topic was China: Threat or Opportunity?The forum was moderated by John Yemma, editor of the Christian Science Monitor, where I ran an op-ed on the subject ahead of the meeting. The combatants were Henry Tang, Alan Tonelson, Peter Ford, and myself, with Kraft Bell facilitating the event. The answer, of course is yes; China is both a threat and an opportunity... [Read more]
I did a spot with Larry Kudlow tonight to discuss today’s retail sales reports that seems to have been a major impetus behind today’s huge stock market increase. Great to work with my old friend again. Not many know this, but Larry and I have been working together since 1976 when he was Chief Economist at Paine Webber and I was a professor at Claremont Men’s College (known as Claremont McKenna College today). The US Advance Advance Monthly Sales for Retail and Food Services Report for was down -0.2% for May (+0.3% excluding motor vehicles), and +7.7% over year ago levels (+8.2% excluding motor vehicles.) Analysts focused on the numbers excluding motor vehicles because the supply chain interruptions caused by the Japan earthquake... [Read more]
(June 14, 2011) Will do an early morning spot on CNBC Squawk Box tomorrow (Wed. 6/15/11) 8:40AM Eastern time (5:40AM hit for me here in California–argh!). Hope you can dial us in. The topic will be the recent unrest in China that was the subject of the Wall Street Journal front page story today. There have been a series of public protests in recent weeks in Inner Mongolia, Lichuan, and Zengcheng, including bombs set off in Fuzhou and Tianjin a few days ago. Individually, the events are hard to connect: a Mongolian sheep herder accidentally killed by a Chinese truck driver; protests against corrupt local officials and property seizures; rough treatment of a migrant street vendor by police. Together, they reveal the stresses on a population... [Read more]
China CPI – February 2010 (The charts below are courtesy of Andy Rothman at CLSA. Andy is by far the most knowledgeable person I know on Chinese inflation issues.) The worry that rising inflation in China will provoke the government to tighten sharply, which would slow growth and push commodity prices lower is unfounded. China’s February CPI was up +2.7% from a year earlier after showing deflation for most of 2009. As the chart below shows, however, it’s all food prices. 2.06% of the 2.7% headline number came from food. Another .44% came from residence expenses, which were pushed up by a one-time increase in utility costs last year. Other goods and services accounted for only 0.2% of the 2.7% increase–about one-fourteenth... [Read more]
The vote is scheduled for Sunday, when most people are not watching the news–I wonder why? This weekend, House Speaker Pelosi is going to try to end-run the Constitution to pass the largest piece of legislation ever enacted–multi-trillion dollar healthcare reform–without a vote. My friend and constitutional law and health care scholar Betsy McCaughey has written two books on the Constitution. Betsy says the Pelosi gambit won’t survive a constitutional challenge in the Supreme Court. You can read Betsy McCaughey’s analysis by clicking here. A number of House Democrats do not want to go on record as having voted for the controversial and unpopular health care bill so Pelosi has crafted a way they can vote... [Read more]
The Consumer Price Index for January 1020 was released today. On the surface, it showed momdest inflation of 2.1% over the past 12 months, as the table below shows. Beneath the surface, in its components, the CPI shows that the real situation is very different. There is a 45.2% difference between the highest annual inflation figure (36.8% for gasoline) and the lowest figure (-8.4% for gas utility costs). Five of the figures are above 10%. Six of them are below zero. The job of the Fed is price stability–to keep prices stable so people will be able to predict their revenues and expenses and make long-term decisions. No rational person could look at these figures and make any long-term decision. This is important to keep ttrack... [Read more]
