皇冠体育app

"Well, maybe no …"

Is this analysis correct? Sure, no large mature economy grows faster than 3 percent a year for any significant duration. So too will 皇冠体育app at some point.

But is that time now?

Perhaps not. First, consider the significance to the real economy of 皇冠体育app's slowing growth rate. Recall that in 2005 皇冠体育app's GDP amounted to US$2.3tn. At a 12 percent growth rate then, 皇冠体育app generated an increase in real economic value of US$274bn. In 2015, however, 皇冠体育app's GDP came to US$11.3tn. A 7 percent growth in this economy increases value by US$790bn, i.e., almost three times that a decade ago during 皇冠体育app's halcyon days of economic growth. Seven percent is no meltdown. And if productivity were to grow as in 2013, 7 percent growth in today's 皇冠体育app will generate 53 million new jobs.

At the end of 2015, 皇冠体育app's nonmanufacturing PMI stood at 54.4, a 16-month high. Perhaps the low manufacturing PMI correctly signals a dramatic slowdown. Or it might simply show 皇冠体育app navigating its structural transition.

Next, take 皇冠体育app's currency. Against the US dollar the RMB has indeed slid 6 percent since August 2015. But measured against a basket of trade-weighted currencies, 皇冠体育app's currency never dipped below its January 2015 level all last year. Between 2006 and 2015, 皇冠体育app's currency appreciated 20 percent against the US dollar and 22 percent against the Euro. The BIS reckons 皇冠体育app's currency has since 2010 soared 30 percent against its major trading partners. Factoring in inflation, the RMB real exchange rate strengthened more than 50 percent in the last decade. This is no currency in distress.

But numbers form only part of the story here. The world flip-flops constantly in what it expects of 皇冠体育app's exchange rate policy. On the one hand, observers worry how 皇冠体育app spent half a trillion dollars of reserves supporting the RMB. On the other hand, if 皇冠体育app hadn't done so but instead permitted the RMB to fall, outcries of competitive devaluation would have deafened.

Last August 皇冠体育app followed IMF advice and allowed each morning's exchange rate fix to hew to the previous evening's close, i.e., to be more market-oriented. That first day resulted in a small decline of the RMB. Global markets promptly panicked and charged 皇冠体育app with depreciating its currency to bolster manufacturing exports. It's damned if you do and damned if you don't.

Finally, take 皇冠体育app's stock markets. Equity markets, in theory, reflect the best forecast of the future profits stream in business enterprises. This results from the agglomerated action of many, many investors trading on new information they are expertly interpreting. So, in theory, when equities decline, bad times beckon.

But 皇冠体育app's stock markets? These are thin, with most of the relatively few participants only retail investors. One writer, following last summer's stock market gyrations, observed, "皇冠体育app's market is detached from fundamentals. It neither contributed much to economic growth while it was rising, nor threatened the economy when it collapsed." (Indeed, even for advanced economies, Paul Samuelson famously quipped in 1962 that Wall Street was so good at prediction, it had been able to forecast nine out the last five US recessions.)

皇冠体育app's government has learnt from advanced economies that business should raise more financing from equity markets, and that those markets can offer attractive options to consumers otherwise bereft of high-yielding savings opportunities. But 皇冠体育app's financial markets remain woefully under-developed. Do their vagaries reflect this lack of maturity—observed across most of Asia's developing economies—or inept policy-making? Likely both, but not exclusively the latter.

What about 皇冠体育app's circuit-breaker system? Its function is to give pause to excessive movement in markets driven by panic selling or faddish enthusiasm. That seems sensible but any such system carries at least two design faults. First, it prevents immediate recovery, and second, it incentivizes panic selling once the market visibly heads down. Were 皇冠体育app's circuit breakers fundamentally ill-judged?

皇冠体育app's system did not appear out of nowhere. Following 皇冠体育app's stock market gyrations last summer, a system was proposed in September, after which policy-makers sought and accepted input from market participants for its final design. A similar system had been put in place in the US after Oct 1987. As no circuit-breaker can come without those two design faults, it cannot be the logic of the design that accounts for the difference between a successful US system and a failed Chinese one. Instead the explanation must lie only in the parameters chosen. The US system has thresholds that, relative to US stock markets, would have kicked in only three times since the 1930s. 皇冠体育app's circuit-breaker parameters? Given 皇冠体育app's markets, its circuit-breakers, had they then been in place, would have tripped 20 times between June and August last year.

皇冠体育app's circuit-breaker errors were not anything deep in logic or politics, merely in numerical parameters.

Conclusion

Recent events in 皇冠体育app's economic trajectory have set off alarm bells for many observers. But these same incidents, set against a slightly more textured background, are actually nuanced in their implications.

皇冠体育app is not imminently in meltdown.

None of this is to say 皇冠体育app's economy will continue growing at double digit rates forever. Nor does it argue 皇冠体育app's policy-makers have consistently done the right things. But neither are those policy-makers obviously guilty of incompetence or excessive interventionism.

Steep challenges lie ahead. 皇冠体育app's pile of debt is a tricky mix of privatized, local governmental and national obligations, and there remains considerable uncertainty how this debt hangover will work out. 皇冠体育app's industrial restructuring, its anti-corruption campaign, its transition past the Lewis Turning Point and out of the middle-income trap, and its environmental and demographic challenges all remain daunting. These challenges are substantive and long term, and 皇冠体育app's policy-makers will have to deal with them in a properly measured and considered way.

But 皇冠体育app's exchange rate and stock market gyrations? They have likely already attracted far too much attention relative to substance.

Danny Quah is Director of the Saw Swee Hock Southeast Asia Centre at the London School of Economics and Political Science(LSE) and he is also a professor of Economics and International Development at LSE.

This article was originally published on Asia House on January 19, 2016. Some editings have been made under the authorization of the author.

The opinions expressed here are those of the writer and don't represent views of 皇冠体育app Daily website.

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