Monthly Archives: September 2015

Do we need an investment function for China?


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Krugman has just published a post that addresses the economic situation in China. He thinks (as many other economists) that we should not be very worried about the possible side effects of China on the rest of the world. Well, the Chinese economic performance is already hitting many economies (mainly through commodity prices) around the world (has anyone said Brazil?), so maybe the “price effects” that Krugman mentions are larger than what he thinks they are.

But here I don’t want to attack Krugman (because overall he seems quite mild about Chinese prospects), but rather I would like to comment very briefly on a report mentioned by him and published by Willem Buiter at City. The report is worth reading, because it makes the case for a global slowdown driven by the (under)performance of the Chinese economy.

There are many sentences in the report I would largely agree with. For instance, when talking about why China’s government debt burden is not as rosy as it seems, Buiter mentions that:

The soaring non-financial private sector debt burden and the matching soaring banking and shadow banking sector balance sheets suggest that a future financial rescue of systemically important and/or politically well-connected insolvent private entities and SOEs by the central government is likely. This could seriously strain even the fiscal capacity of the central government.

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Las cuentas y los cuentos de las balanzas fiscales catalanas


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En vísperas de las elecciones al Parlamento de Cataluña que se celebrarán el próximo 27 de Septiembre, Josep Borrell ha publicado recientemente un libro titulado “Las cuentas y los cuentos de la independencia”. Como menciona, una de las tesis sobre las que se ha apoyado el independentismo ha sido la idea de que la independencia es económicamente positiva – idea materializada en el eslogan “España nos roba”. Dicha idea ha venido siendo analizada a través de las “balanzas fiscales”, instrumentos contables aparentemente no politizados que recogen (como veremos, de un modo u otro) las relaciones económicas de Cataluña con el resto de España. En este post se explica qué son dichas balanzas, cómo se han venido haciendo en España y por qué la más usada por el independentismo catalán es metodológicamente incorrecta.

Ante todo, debe mencionarse que la elaboración de balanzas fiscales es una actividad muy limitada a una serie de países. No puede decirse que exista una metodología mundialmente aceptada para la realización de las mismas, como las que existen para la elaboración de las cuentas nacionales (realizada por las Naciones Unidas) o la balanza de pagos (realizada por el FMI). En los pocos países donde se han venido realizando balanzas fiscales (como Canadá, España, Bélgica, Reino Unido y Australia) los enfoques son diversos, pero los investigadores se decantan en su mayoría por el enfoque llamado “carga-beneficio”. Pero de nuevo, no existe nada que se pueda denominar “oficial” y que pueda ser el germen para la creación de un estándar internacional propiamente definido al que se puedan adherir posteriormente otros países. La razón es que la mayoría de estos estudios son, en el mejor de los casos, semioficiales, realizados por organismos públicos nacionales y regionales pero sin ninguna pretensión de sanción oficial. En el caso de España, el Instituto de Estudios Fiscales (IEF) ha sido el encargado de “oficializar” la manera de cómo computar las balanzas fiscales en este documento – sobre la bochornosa historia del documento hablaremos en otro post más adelante. Continue reading

Further considerations on the Chinese rebalancing


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The last few months have witnessed a series of ever-increasing problems for the Chinese economy. The stock market crash, the devaluation of the currency (and the prospects for additional rounds), the lacklustre performance of the Chinese export sector and the likely deceleration of the economy, just to name a few problems, have provoked general turmoil in financial markets and have created a widespread sense of skepticism in the global media. It has also propelled the idea that a major Chinese slowdown could have serious consequences for the global economy. However, most of these articles get very specific about this or that problem, and they miss the real and broader problem that the Chinese rebalancing process poses. In this article, we will see that the implications of the stock market crash and of the devaluation of the renmimbi for the rebalancing process are not as important as many believe.

The stock market crash has been the most prominent phenomenon in the financial press. The Shanghai Index, for instance, stood at 3,350 points at the beginning of 2015, peaked around 5,100 in the middle of June and since then has lost the staggering amount of 40% (yesterday closed at 3,170). For Western standards, that correction has been brutal. But it is also widely known that government ownership in many companies is high and that households have invested very little in stocks so far. So, beyond firms that may have posted some shares as collateral for their loans, the direct impact of the stock market on the Chinese economy should be very limited- actually, a bulk of the losses have already been anticipated by international investors. We think that the stock market crash should thus be interpreted as a sign that the perception of the Chinese economy is changing, rather than as a first cause for further financial distress. Continue reading