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The annual report on China by the IMF points to a diminishing margin of safety and higher risks for delays in needed economic changes from earlier infrastructure and construction focussed policies which neglected Chinese consumers and savers. The IMF pointed to risks from the shadow banking system and the real estate bubble that need to be addressed.

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Chinese cars priced 25% below competition in Quito, Ecuador. China sold 612,000 cars overseas in 2008.

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Greece's New Democracy party and Mr. Mitsotakis wins about 41% of the vote in Greece's elections. Syriza come is second with 21% and Pasok left party at 12%. Mitsotakis has increased Greece's growth to twice the eurozone rate, and cut migrants by 90% in line with EU policy. New Democracy party gets 145 seats in a 300 member parliament. The first round was conducted under proportional representation, only 60% of voters cast their vote. Mitsotakis will go for another election by July because in a second round the winner gets additional seats and this could let it form its own government. It sees this as needed to maintain policies of economic growth that have led to GDP growth at twice the rate of the eurozone. A surveillance scandal appears not to have affected the election results as Greeks opted for stability and growth. Mitsokatis himself put it this way- "This is not the time for experiments that lead nowhere." Greece was almost out of the eurozone when Syriza conducted referendums on the debt repayment that led to a chaotic situation, and then moved in the opposite direction in callous implementation when the Eurozone held firm. Mitsotakis said Greece needs to achieve an investment grade rating to lower borrowing costs. Worldwide the policy of delivering on growth is key to success in elections in democracies and in countries that are catching up after the colonialist phase. This is true for delivery of infrastructure and public services such as water and electricity, modern rail in India. It is true also for winning enough public support in countries like China that run parliamentary representation under one party the CCP. Strict immigration controls since 2015 reflect a similar policy pursued recently by Italy. Migrants have dropped by 90%. This is popular among Greeks. Looking back Merkel made a serious error in letting in migrants coming in from Hungary and Austria at the beginning of the migration inflows into the EU in 2015. Merkel came from former East Germany, the communist led GDR, and had no understanding of how harmful this would be for the European Union. In just one year by 2016 the misguided open migration policies of Merkel had led to her CDU party getting less votes than an anti immigration AfD party in her home state of Meckenburg. It led to anti-immigration movements in Europe that were used by parties in a self-serving way including in Britain that led to exit of Britain from the EU. It also led to a decade of austerity and a lost decade for the European Union as it permanently sidelined parties to the left such as Social Democrats that unknowingly or unwittingly ended up with the blame for the public's discomfort with lack of borders and migrants upsetting borders. In balance the right way to tackle this was to build stronger economies that supported workers and families in the EU, that then invested significantly in developing countries of Africa and Asia to help them catch up with modernization. Another failure in policy was the Bush-Obama Merkel policies in failed states such as Iraq and Afghanistan. There it was fundamentally important not to get involved in any way that committed US or EU's precious resources.  ...

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U.S. senior Republican Senators Lindsay Graham of South Carolina and John McCain of Arizona, are getting ready to launch a wide ranging probe of Russian interference in the U.S. 2016 presidential election through cyber attacks. The probe is not limited to DNC hacking and the concern is not just that any one candidate was targeted but for the integrity of the American election process. Even though it is not mentioned in this report in the Washington Post by Demirjian, Senators and Congressmen from the Republican Party in charge of key committees of oversight on foreign policy and defense now see it as their responsibility to prevent an enlargement of cyberattacks as Germany and France face elections. Mr. Trump has said in an interview with Time magazine that Russia was not responsible for cyber attacks, that it "could have been China, it could have been some guy in New Jersey." Senator McCain is readying a probe into cyber attacks into U.S. weapons systems, and U.S. military, as the issue widens in its scope and significance for the West and for the U.S. and its allies in Europe and Asia. Senate Select Intelligence Committee Chairman Richard Burr (N.C.) will be working closely with McCain, Senate Armed Services Committee Chairman, on this particular issue and Senator Mitch McConnell has been apprised of the discussions, according to this report in WP. Senator Graham said- "They'll keep doing more here until they pay a price." Graham will hold a series of investigative hearings in 2017 about Russian meddling and "misadventures throughout the world."  This will include new legislation.  Graham told CNN on Dec. 7, 2016 in strong language- "I am going after Russia in every way you can go after Russia. I think they are one of the most destabilizing influences on the world stage. I think they did interfere with our election, and I want Putin personally to pay the price." During the debates Governor Pence of Indiana, the Vice President elect took a strong position on Russia, and the Vice President's positions on foreign policy and defense are similar to that of the Republican leaders in Congress.  It is hard to remember a time in the post war period when there was such a distinct difference in foreign policy and defense as it relates to Russia between a Republican president and both a Republican Congress and almost all Republican governors. Senator Corker from Tennessee, who heads the Senate Foreign Relations Committee, is on the short list to be Secretary of State. A related story in the WSJ shows the selection of military leaders for key intelligence, defense and homeland security, and Gen. Petraeus considered for foreign policy, as diverging from historical practice of keeping civilian oversight preeminent in the U.S.. Rep. Peter King, an early supporter of Trump, who is on committees for intelligence and counterterrorism told MSNBC, that he is confident that Trump will not be "taken in by Putin." The U.S. Republican dominated Congress has taken a strong position on Russian interference in Syria and Ukraine. In the House of Representatives Republican Rep. Devin Nunes from California and Rep. Mac Thornberry from Texas are leading efforts on cyber and intelligence as heads of their committees. ...

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Estimates are for a 9% increase for Apple laptops and iphones Made in China if Apple passes through the price increase following DJT's 54% tariff on Chinese imports. Instead Apple may decide to be patriotic and reduce the huge margins it has charged American customers for three decades now as part of its $500 billion plan to invest in Made in the USA, after waffling and delay for so so long. Even after the first term of DJT in 2016 Apple has waited 8 years to not move some of the production home to avoid an overconcentration in China. This is a sign of its management not having listened to the mood of America preferring huge profit margins to doing the right thing, literally waiting till the last minute.

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This exceptional report by Ian Talley in the WSJ cites trade and currency expert William Cline about the prospect of a worsening trade deficit under the Trump administration. With an improving economy, says Cline, the dollar had already surged about 8% beyond its fair market value during the last 2 years under president Obama as the economy improved. After Trump's election it surged another 3%. This makes it likely that the trade deficit could approach 4% of GDP with the stronger dollar. More protectionist policy to support U.S. industry, worsening trade deficits, more trade friction could be expected in these conditions. He does point out that markets may be overestimating what will be spent on infrastructure, and how much interest rates will go up which support a stronger dollar. Yet the fact remains that under an administration that is keen on promoting U.S. exports a dynamic is underway that makes U.S. exports actually less competitive in international markets.

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Tensions rise in the Korean peninsula after the launch of an intercontinental ballistic missile by North Korea that could reach Alaska. U.S. General Brooks says only "self-restraint, which is a choice, is all that separates armistice from war." The 1953 armistice never really ended the war between the North and the South on the Korean peninsula. The Kim regime in Pyongyang sees its missile systems and nuclear weapons as the only way for it to survive. For the U.S., Japan and North Korea, the situation is getting graver by the year, each year that North Korea develops its missile systems. The U.S. conducted its own military exercize with South Korea off the east coast, firing a number of missiles into the sea. Japan is now considering the Thaad missile defense system for its own defense. That missile defense system was put in place in South Korea by the U.S. in 2016. In a separate analysis David Sanger of the NYT says U.S. options are limited. After the collapse of the Gaddafi regime in Libya which gave up its nuclear weapons capabilities, other regimes see the nuclear weapons as a way to survive, which is why the North Korean regime puts emphasis on its nuclear program. ...

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India's economy is at 2.597 trillion dollars at the end of 2017according to World Bank figures, surpassing 2.582 trillion for France. India's economy has doubled in a decade and is expected to pass Germany and Japan in GDP by 2032, to become the third largest after the U.S. and China.

As China's growth has slowed India's is growing. It recovered by July 2017 from one time events designed to actually spur growth such as the effort to implement a nationwide tax for GST. Demonetization also contributes to growth by accelerating the shift away from cash to recorded and taxable transactions. The tax revenue is increasing as less of the economy is in the black market sector. Higher tax revenues enable larger investments in health, education and infrastructure.

New bankruptcy law and speedy resolution of bad debt of banks is also laying the ground for future growth with new investment.

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Daimler CEO Zietsche, says he sees global demand for all electric cars or electric hybrids at 1-5% of total demand by 2020. This was a cautious and measured view for Merceds Benz. Benz joined BYD of China in a joint electric car venture in China, with an investment of $90 million. This is in conrtrast to the view of Nissan's Ghosn, who sees the demand closer to 10% by 2020 for electric cars. Nissan plans to produce 500,000 Leaf electric cars by 2012.

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A study published in the British journal Lancet shows that the number of people suffering from diabetes went from 153 million in 1980 to 353 million in 2008. The study shows the U.S. having 24.7 millon diabetics in 2008, which is three times the number from 1980. About 70% of this is from population growth and aging, and the rest from obesity, lack of exercize, changing diet. The American Diabetes Association estimated the cost of treating diabetes in the U.S. at $174 billion for 2007. About 138 million diabetics live in China and India. In India there is an additional cause- malnutrition in early childhood years for the poorer segment of the population. European countries have done better than the U.S., Mexico, India and China. S. Korea and Thailand have done better than other Asian countries. And this is attributed to healthier lifestyles, diet and less obesity in these countries.

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GDP expanded at 3.5% in the fourth quarter of 2016, according to the Turkey Statistics Office. This follows a contraction by 1.8% in the third quarter of 2016. For the full year the GDP growth is 2.9 percent, a decline from the 6.1% in 2015. In 2015 Turkey gained from lower oil prices. This was offset in 2016 by the politics in the region- the increased instability in the country following a crackdown on the opposition and media, internal conflict in the Kurdish region which appeared for a time to be leading to peaceful settlement. As a result tourism revenues declined by 30% and this was offset by increased government spending. The uncertainty before the referendum also leads to decline in foreign investment and investment by domestic firms.

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Western nations agreed to reduce their deficits by half by the year 2013. This was the consensus reached at the Toronto G-20 meeting. Germany pushed hard for cutting debt loads before they become unsustainable with higher interest rates and defaulting nations. China continued to emphasize a gradual withdrawal of stimulus.

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Problems with China's health care system stem form years of underspending. About 1% of GDP went to healthcare in 2006,according to the WHO, ranking China at No. 156 of 196 nations. This underinvestment has caused great hardship to the rural poor who have postponed or been denied access to healthcare because of exorbitant expenses. It shows up in the number of trained medical workers- only 17% of China's medical workers are university graduates. In village and township clinics the number falls to 2%. The government has dedicated $121 billion for health care through 2011. But this may not be enough. Aobut 300 million in the rural areas have no coverage at all. The government's plan is to get farmers insured through county level rural- cooperative insurance plans. These programs begun in 2003, offer only scanty coverage. Outpatient services and medications are not covered and coverage varies from county to county for hospitalization bills. The goal of th health ministry is to get the coverage for hospitalization bills up to 50%....

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Germany's Economy minister Zypries warned that Germany would take legal action by taking the case to the World Trade Organization if president Trump imposes tariffs above that allowed by WTO rules. She said this before a meeting at the White House between president Trump and Chancellor Merkel. The U.S. is Germany's largest export market with 107 billion in imports and the U.S. exports 58 billion euros of products to the U.S. Zypries accepted that the large trade surplus of Germany was "a problem," but that America "needs our machines and industrial plants" for the time being. Germany has insisted that it does not provide unfair advantages to its companies, and that German companies were simply more competitive. Trump has focussed largely on China for anti-competitive practices, though he mentioned BMW by name during the campaign. In the last 2 years the euro has depreciated significantly against the dollar giving German companies competitive advantage, largely as a result of the ECB- in opposition to German economic policy- trying to stimulate the economy of other southern eurozone countries such as Spain, Italy and France. ...

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Rex Tillerson, U.S. Secretary of State takes a strong stand on North Korean missile testing and nuclear program in a visit to Seoul and Beijing. He said the U.S. would be forced to take pre-emptive action "if they elevate their threat of their weapons program"  to an unacceptable level. Continuing a policy of the Obama administration following missile tests by North Korea, the Trump administration has rejected any talks with North Korea. Tillerson said that "the policy of strategic patience has ended." It was also meant to signal U.S. intentions before Tillerson goes to Beijing from Seoul. President Trump commented on Twitter; "North Korea is behaving very badly. They have been "playing" the United States for years. China has done little to help." Because China sees North Korea as a bargaining chip with the U.S., Japan and South Korea, the situation has ended repeatedly in a impasse with the North Korean nuclear and missile program continuing during the Bush and Obama administrations. This has also meant that North Korea was unlikely to collapse on its own, with China pursuing a policy of using North Korea as part of its defense policies in the region, as pointed out by Sanger in this report. As the North's missile program continues the U.S., and with the North seeing the missile program as the only way to ensure the survival of the regime, the U.S. needed to come up with a new way to tackle the situation.   ...

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Two way trade is expanding at 35% for the last 5 years to $15 billion. A new goal is being set for expanding it to $50 billion by 2010. Senior executives of big Chinese infrastructure companies are involved and the exchange is at the highest level, with Bo Xilai, Commerce Minister of China, heading a 200 member delegation to New Delhi. This includes senior executives of Shanghai Electric Power Generation Group, ZTE Corp, and China Corporation Bank. US- India trade growth goals were set by President Bush in a recent visit. With Bo's visit China- India trade growth goals are being set on the same scale. Bo said China and India can learn a lot from each other- "China has a lot to offer in infrastructure development to India and we can learn about developing software, information technology, and how to improve the services sector."

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Prices for WTI crude dropped below $50 in January 2015. Higher inventories weighed on oil prices and Saudi Arabia added to the pressure by cutting the price of crude sold in the U.S.

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Jimmy Carter comes back to us from a different era. He was born in a tiny town of Plains, Georgia, in 1924 and grew up on a family farm in a home that lacked plumbing, electricity, as a boy.  Jimmy Carter attended college for 2 years in Georgia, then enrolled at the US Naval Academy graduating in 1946. It shows the changes happening in the US with Franklin Roosevelt and Harry Truman in the efforts to industrialize America, bringing electricity and new opportunity for college education to rural areas in 1932-1952 which continued with highway systems under Eisenhower 1952-1960.  Carter also led the unwinding of the Democratic party with roots in the Roosevelts-Wilson era since 1902, going back to Teddy Roosevelt who as a Republican pushed hard for integrity, pro worker and antimonopoly policies in the administration. A process that went on with another Southerner, this time from Arkansas that led China's entry into the WTO and world trade without any safeguards for American workers 1992-2000. Policies that went unchanged under another Democrat Obama in 2008-2016. Instead of staying in the Navy he joined his family's peanut farm business in 1953, followed by running for governor of Georgia and grasping the opportunity to run for president as an evangelical from the South to bring moral integrity to the White House.   ...

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How China is reviving memories of its struggles with Japan since 1900 and its efforts to modernize since 1950 under the leadership of the Communist Party led by Mao and Chou-en-Lai. Who were followed by 1990-2010 by a technocratic class of engineers and professionals, and now reverts back under XI Jinping -a son of one of the founders of the revolutionary armies that fought the Japanese- reverts back to its revolutionary ideologies that defined its emergence as a modern nation. Only American business interests fail to understand the China of president Xi Jinping because they like Tim Cook have not read or understood the modern history of China. In the book "Stilwell and the American Experience in China" by Tuchman, a lot of this can be experienced first hand as we see West point colonel Joe Stilwell experience China first hand since 1920's through the phase of nationalist sentiments, outright Japanese invasion, and the setbacks as North China and the Yangste Valley fall to Japan's Kwantung Army elements who run the government by 1939. Then comes the Second World War, Marshall is appointed chief of the Army by FDR in 1939 and he makes Stilwell brigadier general and responsible for China for the next 8 years. This is a China Stilwell loved and understood from daily contacts with the ordinary people of China that are on every page of this book. Jinping's father grew up in this way leading the revolutionary armies that fought the Japanese, and some of this passed on to his son even though he suffered from the Great Proleterian Cultural Revolution of the 1960's, but understood the significance of what his parent's generation had accomplished in creating modern China free of centuries of unimaginable poverty, indifference of the ruling classes, and oppression made worse by foreign powers. ...

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This editorial in the Economist points to the long term effects of a crash in China's stock markets. This would reduce access to equity markets for corporate funding. It would pose larger risks because of the increase in total debt in the Chinese economy from 150% in 2008 to more than 250% in 2015. The fallout would not be as large as in the U.S. after a stock market bubble collapsed in the U.S., because market capitalization is about 40% of GDP, and households have put about 10% of their wealth in stock markets. Coming at a time when China's economy is slowing, and it faces other problems such as addressing pollution, healthcare and other issues, this could lead to a further slowdown for a prolonged period. Most economists from Krugman to Summers, say China is no exception to basic rules of finance and economics. The indexes have accelerated in the past year- CSI300 index of China's largest mainland stocks doubling in the past year, and ChiNext market for startups tripling in the past year, and at P/E ratio of 140 times prior year earnings. 4 million new brokerage accounts opened in one week of April 2015, and a study shows about 66% of people buying stocks for the first time have no schooling beyond the age of 15. Margin financing has increased to 2 trillion yuan or $325 billion. Clearly unlike the U.S. investors and stock market authorites have not experienced the collapse of a bubble with all the economic distress for a prolonged period....