A Chinese reason to be economically macro optimisticThis is the chilly time of year (January) when the wise and the good meet at Davos in Switzerland to form the World Economic Forum.
Stephen King, chief economist at HSBC, said in his speech that the “emerging market index” confirmed that the world economy was at an unprecedented turning point where developing nations would be able to stand on their own feet. The theory behind this statement is that a tipping point has arisen such that emerging markets are self sustaining. In other words they can grow irrespective of Western economic activity.
Apparently there is a minor and a major macro driver for such optimism. The minor is Brazil. The producer of commodities called Brazil has kept growing notwithstanding the depth of the downturn in the West (an indicator of this is BlackRock Latin America IT plc investment trust). In turn this is largely due to demand from China that has kept prices buoyant.
Which leaves us with the major driver of economic optimism on a macro scale. China. Mr Li Keqiang, China’s vice-premier, said in Davos that China’s export and investment model that had sustained growth thus far had to change. In future China would concentrate on domestic demand and better social safety nets. Urbanisation is driving strong internal consumption leading to retail sales up 15% in 2009. In addition China would be opened up to inward investment including improved protection of intellectual property rights.
All this patter could be dismissed as what the Swiss audience wants to here and to assuage the currency critics. But, if the boatloads of mainland Chinese tourists braving a UK Lake District winter is anything to go by, I do not think so.
jgs-2010
