LyrArc Article Gist
This editorial in the Economist looks at China's relationship with Russia. It says the Ukraine conflict and western sanctions have resulted in Russia moving closer to China. Yet the two countries have competing interests in central Asia, and different relations with India and Vietnam, in the Asian region. Russia is also wary of China copying designs of Sukhoi aircraft in sales to China of advanced military technology. The major oil and gas deal signed in 2014 provides Russia with a new outlet for oil and gas with the cooling of the relationship with Europe. Yet Russia has strong ties built with Germany over the entire post war period, and differences have emerged in U.S.- German relations. Germany's relationship with Russia- cooled by sanctions and German wariness over Russian intervention in Ukraine and Russian wariness over NATO close to its borders- spans 7 decades and is likely to remain strong in the long term. This comes from the shared sense of awareness of the terrible conflicts of an earlier period, just as it has for French-German relations, and from the strong efforts made by Germany to preserve the relationship and peace in Europe. Chinese president Xi's visit to Moscow on May 9, for celebrations of victory over Nazi Germany, will be followed by a visit May 10 by Chancellor Merkel of Germany. A factor in German-Russian relations is the close trade links, cultural exchanges, and history going back to the GDR where Chancellor Merkel is from, built up over many years, that are likely to set the long term future of relations. China's dominant partner relationship in the China- Russia relations does not bode well for the future of relations, compared to the equal partner relations with its European neighbor, Germany. In this different light Ukraine is a temporary pause, in German-Russian relations and peace in Europe, a situation which is in China's long term interest as it focusses on its economy and the next phase of development for a modernized economy. Especially as China continues to build on its own vital trade relations with Germany and the European Union, the latest example being Germany, other EU nations, and India, joining the China sponsored Asian Infrastructure Investment Bank. ...

LyrArc Article Gist
Electricity production and consumption data from the provinces has been overstated say experts making the decline in economic growth in China look less severe than it really is. Coal stockpiles at one key storage location in Qinhuangdao port reached 9.5 million tons in June, says an analyst for Wood Mackenzie, global energy consulting firm, a level not seen since the level of 9.3 million tons in November 2008 during the height of the 2008 financial crisis.

LyrArc Article Gist
The WSJ's Paul Sonne gives this exceptional account of how Russians are coping in the economic crisis of 2015-2016, with the twin shocks of the collapse in the ruble and the collapse in oil prices. He does this by looking at the Kaluga region, a provincial city 110 miles south of Moscow that has benefitted from large foreign investment to meet the needs of 20 million consumers in the Moscow region. The governor of Kaluga since 2000, Anatoly Artamonov, worked hard to attract foreign investment that includes VW, Volvo AG, Continental AG, Lafarge, Samsung Electronics, General Electric, and other companies. He ran a collective in the Brezhnev era, and now is energetic in meeting needs of foreign investors. Karmanov says it is stupidity to not say he is talking to business people in other parts of the world because of the political climate in the country. About 42% of the industrial output in Kaluga comes from the foreign automobile plants, including VW. The automobile and light commercial vehicle production in Feb. 2015 dropped by about 39% compared to Feb. 2014, according to the Association of European Business estimate. Only 40% of autombile production cost from assembly lines is sourced locally, the rest is imported at the new value of the ruble which has fallen about 50%, leading to higher prices and slumping demand. Ordinary Russians are feeling the effects of the crisis with higher prices. Consumer price inflation in Feb. 2015 was at 16.7%, with 23.3% increase in food prices. High interest rates to prop up the ruble meant cutting off access to credit to finance consumer purchases. An 8% drop in real wages in Jan. 2015, according to Capital Economics, added to pressures on consumers. With the political and economic crisis following Russia's Ukraine intervention foreign investment in 2014 declined to $18.6 billion in 2014 compared to $61.5 billion in 2013, and the EBRD bank cut financing with the sanctions....

LyrArc Article Gist
WSJ reporter Bob Davis writes this report on the end of the China economic miracle in 2014 as he completes a 4 year assignment covering China. He says China's economy is slowing rapidly and he is pessimistic abou the future. Construction cranes visible across China's skyline says Davis, can no longer be interpreted as growth inducing. With rows upon rows of empty flats in third and fourth tier cities which account for the bulk of the increase in housing construction, the consequences of a debt fueled construction boom are easy to see. Davis cites the IMF on the dangers of credit fueled growth in China- only 4 countries have experienced as rapid an increase in credit to GDP ratio in 5 years. Each of the 4 countries Brazil, Ireland, Spain and Sweden experienced a sharp decline in GDP growth and banking crises following the credit bubble. Estimates of debt to GDP are as high as 250% for China. Krugman, Roubini and other economists have warned about the credit bubble, saying China is no exception to the rule for the risks posed by such a bubble. ...

LyrArc Article Gist
Government GDP figures show the GDP shrank by 1.8% in the third quarter of 2016 compared to the same period in 2015, the first such contraction in the economy since 2009. Household consumption was down 3.2%. The sharp decline in the value of the lira by 20% in 2016 makes imports costlier, in an economy dependent on consumption spending and tourism for higher GDP growth. Political uncertainty with instability in Turkey following a crackdown on opposition and media also leads to decline in foreign investment and investment by domestic firms.

LyrArc Article Gist
The new oil law allowing foreign oil companies to compete with Pemex passes the Senate in Mexico and now goes to the lower house. The legislation removes the 4 oil worker union's representatives from the 15 person Board of Pemex. The oil law now leaves only a 10 member board- five appointed by the government and five independent members approved by the Senate. Because past opening of investment by the private sector in state owned railways and telecom sectors has led to wealth passing into the hands of a few business owners and worsening competitiveness, there is concern in Mexico about how this law will be implemented so that it benefits Mexico and Mexicans through foreign investment in the oil industry. Leftist parties are pushing a bill in the lower house to allow a referendum on the oil law by 2015 if 1.6 million signatures are collected. Oil experts point to foreign investment in the Mexican oil industry as further enhancing the prospects of North American oil production in comparison to the position of Middle East oil producers, because of Mexico's large shale oil and gas reserves and the prospects for new exploration in deep waters. ...

LyrArc Article Gist
Dow Chemical CEO Liveris says he sees signs of recovery in China in 2013. He says small and medium sized businesses in China have better access to financing in Dec. 2012 after a period of destocking and hard times accessing credit.

LyrArc Article Gist
Liu He, the author of the 2013 DRC report on recommended changes to China's banking and financial system, is now the director of the Communist party's top financial policy committee and senior advisor to president Jinping. Changes he is pushing for relate to increasing focus on credit risk for China's banks, promoting competiion between banks, a mechanism for letting banks fail, and a deposit insurance program to protect the public against failing banks. To open up the sector dominated by state owned banks, opening private banks would be encouraged. Local governments would be allowed to issue bonds in an effort to reduce their dependence on land sales and opaque off-market borrowing. The urgency of this agenda comes from the realization in top Chinese policy circles and the Jinping-Keqiang administration of the risks to the banking sysem from the lack of attention to credit risks in bank lending.

LyrArc Article Gist
The influence of business executives who helped shape president Trump's views on Mexico, China, Export Import Bank, and other issues is covered by Stokols and Bender of WSJ. On Mexico the departure of Mike Flynn helped moderate views, Wilbur Ross, the Commerce Secretary also provided a moderating influence. The plans are now to change NAFTA but not entirely redo the agreement. On the Export Import Bank the views of Boeing CEO Muilenburg, who explained to Trump why the Bank supported U.S. exports and how other countries had similar banks, led to the president filling the bank vacancies. On China the influence of NEC head, Gary Cohn, former president of Goldman Sachs, and other business executives, led to a less confrontational position. The president once called NATO obsolete during the campaign but he met this week with NATO secretary general Stoltenberg this week and expressed strong support for NATO after rising tensions with Russia.

LyrArc Article Gist
Andrew Jacobs provides this exceptional account of the tense atmosphere in Brazil, and the split between supporters of the government and the opposition, in April 2016 with the impeachment effort against president Rousseff.

LyrArc Article Gist
Projections by the U.S. Energy information Administration and the International Energy Agency for oil supplies and demand 2010-2035. Continued high growth in demand in India and China, and declining demand in Japan, U.S. and the EU.

LyrArc Article Gist
In a program of gradual change the new leadership under premier Li Keqiang steers China's economy in the new direction set by the DRC Report: China 2030 and the Third Plenum in Nov. 2013. New priorities listed under major Tasks in the annual work report by Li Keqiang place setting up deposit insurance at the top of the list. Policy changes include allowing cities to issue bonds directly to increase transparency in construction spending and control burgeoning debt.

LyrArc Article Gist
The Economist looks at real estate markets in the U.S., Canada, Britain, Germany, Hong Kong, India and other countries in May 2013. It looks at price to disposable income and price to rent ratios and sees if these ratios are higher than historical averages to determine if prices are based on sound foundations. Canada's real estate market looks set to face problems of a bubble bursting. The U.S. recovery is seen to be based on firm foundations. Property prices are undervalued in Germany and set to rise.

LyrArc Article Gist
Fears about a property price bubble in China bursting with the central bank not able to control the economy. Increasing fears that China may not be able to control the bubble. Other countries where bubble effects are taking place: Canada where housing prices are accelerating, Brazil with expected GDP growth of 5.8% and "hot money" pouring in, India where inflation has reached 15% and $92 billion of foreign investment in Indian stocks and bonds, Australia with its hot mining sector with trade connections to China, South Korea with growth approaching 5% and high rates of household debt. GDP and property prices increased by 11% in China in the 1st quarter of 2010. Many of these economies have connections with China, including Brazil and Australia with commodities sectors dependent on China.

LyrArc Article Gist
Australia exceeded China in total revenue for GE by $100 million, with $5.8 billion in revenues. GE now sees resource rich countries providing revenue growth of 25% in the next 2 years compared to 10-15% for China and India. The Ichthys $34 billion LNG project by Total SA and Inpex of Japan alone generated $1.1 billion in contracts for gas turbines, compressors and underwater production systems. The Gorgon project of Chevron on the northwest coast of Australia generated $1.3 billion in revenue.

LyrArc Article Gist
Foreign institutional investors responding to negative sentiment for emerging markets in general took out $2.6 billion from India in August 2015. Yet average allocations to India for emerging market funds have increased to about 10.7% in July 2015, because India looks much better than other emerging markets. By comparison China is at 20.25%.