TEc - Is China the best role model for emerging markets? - why I think not...

A very suggestive title to have picked to introduce theme China.

A country that has unabashedly copied any number of tangibles and intangibles from around the world. They have done so to their own considerable advantage and gain.
To add context one of the latest examples is the perfect Lego-type set of pieces produced by a Chinese maker.

On fair assessment, it may be said that copying has served Chinese interests right.
Economic, social, trading interests foremost.

It has allowed the country to effectively leap-frog several stages and reach pole position across many tables.
Importantly, in the process China got massive help from Western multinational companies - large, medium and even small - that relocated production there to then import and sell here at marginally lower prices, if at all.

But that which has worked for a 1.4bn nation with its specifics does not necessarily apply elsewhere. Moreover, on many counts China's reality is only partially known to us.
Several aspects driving its astonishing success in a short time-span should be closely followed nonetheless.

A strong administration/government with a sense of collective purpose? 

Why ever not, especially if we compare projects delivered - at national, provincial, regional and local level - to those of many weak rudderless governments captured by vested interests?

Why has the world taken notice of China if not for its growing economic clout? Political, financial and military power derives from it, not the other way around.

Many lessons may be learned from them and adapted to local conditions.

Their willingness to forge win-win links with other countries, where verified, must also be seized upon.

To my mind, China is not the best role model for emerging markets.
Is there any?

TEc - Imports bad, exports good? - striking the right balance should be the goal

A challenging question that baffles simple answers.

Neither deficits nor surpluses are necessarily a good thing to whichever country.

First and foremost an assessment of a particular country's stage of development and needs across the economy should be made. Then we know that country's social, economic and productive set-up.

Finally, self-evidence shows that Germany and Japan grew incredibly rich on massive export drives over several decades. The same applies to South Korea, Canada, Singapore or to emerging China as we write. Or Italy and France and many more. France has now been in the red for a while.
It can afford to as long as it doesn't become structural. Or leads to massive losses of industrial production with far-reaching implications.
A stretched timeline is called for to gauge each country and overall economic performance.

Imports are certainly not bad especially if they produce greater dynamism in an economy: raising the quality of products, pushing manufacturing prices down, increasing positive competition across the board.
Excessive imports over long periods generating large-scale deficits (in goods is bad enough, goods and services much worse) are certainly a symptom of other ills in any given economy. Besides, a point in time is reached when it becomes ever harder to finance them. An economy becomes unable to create wealth, the country persistently consumes over and above its production capacity. A society that is plagued by low-paying, low-skilled jobs with an oversized State. Perhaps a small high-paying private sector prospers becoming the envy of the rest.

A measure of balance are the keywords that deserve repetition and action.

In short, over a 10-year period, an economy may do well by counting up 5 deficits and as many surpluses.

FT - Portugal's comeback is the Eurozone's Socialist success story - there's more to it than news hype

As far as I'm concerned it is good news plain and simple - no more than that: just Good News! Assessments are utterly predictable - even the choice of words - you read one, you've read them all.
That said, due merit falls to both current and former governments but especially to a people who bore the brunt of a deliberately-driven financially troubled country that clearly overreached itself.
The financial system, however, will always want (and need) credit-hungry economies to borrow wildly. The wilder the better. Give them enough rope and let them (only just) hang themselves... Let them have a ball while the going is good. Then, suddenly, pull the plug and stop the music.

The leadership will grumble but the vast majority picks up any tab regardless. (one ex: VAT on electricity bills shot up from 13 to 23%, millions pay millions more each month - looks like a one-off but the rate is unlikely to ever come down).
Financial markets thrive in the so-called leverage/deleverage cycles.
Creditors-in-waiting fill the void when serious imbalances loom and markets shut down.
IMF heads cannot disguise their contentment.They become important overnight.
Another one bites the dust.

If the local leadership did not learn a thing (Centeno - the Finance Minister, has meanwhile momentarily(?) displayed remarkable caution...hats off) the next Schauble in Berlin will smile wryly again down the line. His country's sovereign debt is large enough but well under control and manageable.

By then, Centeno, like his predecessors, will be taking care of himself and kin.
Portugal gets by.
This time the noose was fairly tight but not tight enough.

TEc - Europe must seize the chance to fix the Euro - will it?

No one quite knows what form or shape the missing blocks in the Euro construction will look like.
The reason being that the underlying causes for the hesitations of the recent past remain as ubiquitous as ever.
However, I believe that a long overdue point in time will eventually arrive when it becomes untenable not to act.
Surplus and deficit economies can hardly survive indefinitely in a single currency bloc without some sort of realistic arrangement that addresses imbalances.

But such is the known context over which action must ensue.
Indeed, already there is a relatively severe mismatch between the Euro's two major economies of France and Germany. This is only amplified when the Netherlands and Germany (and a couple more) stick to one side while on the other most of the rest may be found.

Unless a broad-based common vision for the Euro is adopted by the 19, the currency will limp on but is unlikely to survive into the future. Financial turmoil hitting again is a when not an if.
In fact, words are increasingly becoming meaningless for excessive repetition and lack of consequence.

Germany's general election is the next stop in a long timeline that has not witnessed much change since Draghi's grand stopgap move?
Should Germany's leadership remain as frozen as they have been or should Macron fail in his attempts to get those who matter to do what it takes, then our cherished single currency - still loved by most across the Eurozone - faces a perilous future.

As with all times that beg bold decisions, statesmanship is direly needed.

EIU - Could water scarcity lead to water wars?

It is dreadful to even begin to contemplate the prospect of water wars.

While the issue pops up occasionally and is pressing to various degrees in several parts of the world, much less is known of real policy/ies being implemented to manage, mitigate or overcome the macro problem altogether.

Despite instances of acute shortages, it would seem to me that so far water scarcity is very localized. It is mostly tackled in ways deemed as pragmatic rather than scientific. Such approaches do fix the urgency of the minute but hardly address the structural issue, if and where one is identified. Here a line must be drawn to distinguish between droughts on a return period and the unavailability of water.

There have always been regions prone to water scarcity for natural reasons.
Climate factors cannot be micro-managed or reinvented which is why large human settlements set down on fertile soils close to river banks, water bodies or areas of regular rainfall. 

To answer a troubling question, I'd say that I do not envisage a water war as such.
There will continue to be water conflicts and strife at local and regional level. The clashes may perhaps scale up in seriousness, tone and frequency. The geographic location of potential conflict should remain largely unaltered. Unless the root-causes there are dealt with meaningfully to literally quench the thirst permanently.

The top priority of policymakers is to heed the call from those who have already closely studied the problem. Their conclusions, recommendations based on science, practicalities and volumes - natural and both human and material - must be taken into account building feasible long-lasting solutions.

If humans can get it all right, it will still be Mother-Nature having the final say...

TEc - How to deal with the world's most dangerous regime? - It's a catch-22!

Opinion does not count for regimes such as North Korea's. We've seen it before across the world. The true mindset of tinpot dictators, 'goldpot' dictators or simply strong-headed strongmen, as single leaders, is predictable. It delivers behaviour in whimsical if not sickly fashion regardless. As long as they are seen to command full authority in the State's hierarchy, mainly among relevant people in arms to toy with, nothing else ever seems to matter.

This is why NK needs to be closely monitored and eventually prevented from building up more threatening and far-reaching deadly weapons.
Can it be done?
Should it be done?
Will it be done?
Speculate we may but the overwhelming issue is crystal clear. No one in his sane mind would wish for war - knowing the odds and the potential for rapid escalation and outrageous loss of life - but a longstanding question looms larger than ever: what to do if and when NK becomes the full-fledged nuclear power it appears so intent on becoming?
While existing nuclear powers are taken for granted - as it is we assume existing nuclear weapons to be in safe hands (even if we cannot be entirely sure) - NK has drawn oversized attention for its special focus on getting there as well.
Their purpose is also very clear to most, a quest to bully other nations and perpetuate regime survival in the current form. If such a day does dawn, whoever leads the regime might also attempt to blackmail South Korea into reunification on the North's terms.
The stakes are therefore extremely high in Asia's Far East. A catch-22 situation.
Geopolitics there is being kicked around by a single country whose survival has remained assured by its giant neighbour. China could cause NK to collapse in weeks if it so wished.
However, it will only act in the event that it should no longer regard NK as a convenient buffer:
to contain American presence in the peninsula at arm's length,
to keep Japan uneasy on its toes but, barred by its own constitution, hardly able to do much else and, importantly,
to strengthen and advance China's own case, influence and interests in the region.
For China, NK is the convenient State and I don't see how this will change in the near future.

TEc - Averting a Chinese-American trade war - No war of any sort, certainly fairer deals

No fair-minded person wants a trade war or a war of any kind with China. There are many stated facts - unfortunately, to my mind - in the world's global economy that few are prepared to question on grounds of common sense no less.
We do know about the workings of the modern economy/world, global supply chains and every other single practical concept that has taken root. What I do question in a long while is whether or not the time has come to assess the very trading model we have happily built over the years.
All relevant input data are there, so too the wide-ranging consequences, painful to many and ultimately signalling the rapid rise of new economic powers and the demise of others. If the former is welcome it is the latter that should raise far more concerns. The volumes conveyed by the figures spell a great deal more than mere economics as delivered by capitalism in earnest. Eight words might accurately define it: maximise profit, minimise cost regardless of everything else.

What if Boeing decided to relocate its entire business to China for sound managerial reasons?
We've heard the arguments before with every decision made by whichever company.
Would that be OK in the larger scheme of things?
I say NO. It would further tilt America's already appallingly unbalanced trade relation with China just as the country expands significantly its fleet of jets over the coming decades.
This would then be the arithmetic consideration. What about every other whose relevance needs no telling?

America's goods trade deficit with the world is unsustainable for sheer size and stubbornness.
It has become a permanent fixture in a country whose hefty US$18.5-19tn economy cannot indefinitely stomach it all.
Surplus countries/nations will never find fault with the current arrangement.
Should they swing into the red and they would be first in the line shouting foul.

It is up to chronically deficit countries to find ways that will restore at least a semblance of balance to bilateral and multilateral trade flows.

TEc - Military spending by NATO members - The US has a point

A very relevant article that presents a stark picture providing enough food for thought.
Even if comparisons should need some detail to make them more representative, there is no denying that the US remains by far the dominant force within NATO on all counts. If a fairly modest set target of 2% of GDP has not been taken seriously by most member-countries after nearly a decade, then the US is fully entitled to call everyone's attention to listen up.
Among the other major economies of the West - Canada, Germany, Italy, Spain and France - the level of spending ranges from ridiculous to barely survival mode. Whatever reasons led successive governments to play down the military and scale back their budgets, the time is overly ripe for a policy and attitude reversal.
Germany's case (and Canada's in North America) is especially striking.
That a major country/biggest European economy whose coffers have been overflowing since long, should make a smaller effort than minor countries with dire public finances is utterly unacceptable.
Indeed, only the US still has the leverage to press German leadership to step up to the plate and do their share.

TEc - America, China and the risk of a trade war - stakes are high for both countries

No fair-minded person would suggest an all-out destructive US-China trade war. There would be significant losses inflicted on both countries and world trade generally would suffer as well.
Besides, it simply doesn't sound right to pursue such a confrontational path. An exercise in self-harm too.Yet the big question remains unanswered if not unaddressed at all:Can a country run a massive trading deficit indefinitely?The US has had a deficit with China since 1985.The issue, however, is that the deficit ballooned beyond any reasonable imbalance, particularly from 2000. Furthermore, it has transmuted into a structural shortfall by US manufacturing that gets plugged by Chinese production. We know about the supply chains in place in today's global economy. Isn't that exactly the problem?Trade balances are not righted by executive decree. It will be up to private industry (thousands of companies) to review and reset the geographic location of major/many suppliers. This is as much an industry problem as it is a policy issue arising from quick-paced free-for-all globalisation where only two variables ever mattered: cost (minimisation) and profit (maximisation).The sum total is clearly reflected in the goods trade figures that have so consistently built up. Menacingly, dare I say.To my mind, they are obviously unsustainable and have been for some time. Implications are far wider than economics.If 10-15 years have not been enough to extract useful insight, more of the same into the next 10-15 will see an entirely changed reality in China-US relations.Inevitable?Many will likely nod yes, others will shrug off with indifference.It is up to national government and policymakers to determine - as far as possible - the macro framework within which an economy operates.To my mind, free trade is only so good as long as there are winners on all sides. Or manageable deficits for a given time at worst.Not seemingly permanent winners and permanent losers that do not swap places.
The winners do not complain about the model in place.
Should the losers?

TEc - The busiest airports in Europe - is sky the limit?

The top 10 busiest airports in Europe show an adaptable 3-tier structure. Topmost is Heathrow well ahead of the pack, ParisCDG a distant second.
Not when it comes to aircraft movements presenting a far more mixed picture. 

Now a decision has been made to add a third runway to LHR it may be said that capacity there (movements and pax throughput) will rise by 50%. That would mean additional 40M passengers may go through its 5 Terminals into the future. Will they?
That begs a final question: what is LHR's ultimate capacity that will permanently saturate the facility, both Aerodrome and Terminals?

FT - EU looks to Merkel as rattled leaders weigh response to Trump - EU must do a lot more to disprove DJT

The EU badly needs its institutions - Commission, Council and Parliament + ECB - to gain prominence, power, initiative, independence and lead the EU from the front in the interests of every single member-State in the bloc. The reason Europe looks in a shambles is that Germany subtly acquired an overwhelming weight since the financial meltdown of 2007-8. Internally, nothing in the EU can move without its tacit or overt agreement. In many ways, the institutions work as near conduits or mouthpieces for the German interest. Inconsequential bodies in practice, in the minds of many Europeans tired and fed-up with a state of limbo that brings them no direct benefit.

In a nutshell, the so-called European political project is moribund, the result of accumulated weaknesses by the leaders from relevant countries not least AMerkel herself. The fact that she displayed remarkable will and strength on several matters - and must be applauded for that - does not hide from view her country's every major failing that so contributed to stalling the EU.

Brexit is primarily an internal UK issue - has long been - but majority opinion in Britain would never have swayed the way it did if not for the looseness of a drifting Union that lost its appeal to the learned let alone to the common man. Many Europeans may even eye AMerkel with sympathy but they resent coming under the German wing and always will. Germany as the EU's dominant force, which is, rightly or wrongly, a common perception. A Union that has seen one clear winner, a few satellite winners around it and far too many losers. Not to mention the domestic problems each country faces anyway.

Above all, no common EU goal appears in sight despite the Commission's official rhetoric.

Viewed from outside the reality of German dominance likely feels even greater.
And suddenly DJTrump comes along and now sits at the White House. His manner and style may not be right but is it not the case that the man does have a point on far too many issues? Or is it too hard to acknowledge just that because of strong dislike for the messenger?

Germany as the leading country in the EU now has the unique opportunity to show that it does stand fully behind the European project, the Eurozone, the Euro, European defence and all things European. Failure to do this will only prove DJT right over time.

Such a predicament would be very dire for the very survival of the EU as a force to reckon with.
I am factoring a 27-member bloc in the wake of the UK's already sure departure.

FT - Trump's top trade adviser accuses Germany of currency exploitation - a viewpoint that commands thought

There are any number of ways to look at all the issues related to international trade. Yet I believe a few hard facts will have to be accepted largely undisputed regardless of the messenger:

1.The US has every right reason to worry about its ever bulging massive trade deficit that has disproportionately benefited China, Germany or Mexico. To label as protectionism every move a sovereign country makes to reduce longstanding eye-popping imbalances is simply wrong. Free trade is only so good as long as there are winners only. Not permanent winners and permanent losers that do not swap places.
When oversized surpluses are met by equally oversized deficits I take it can only last for a given period. Needless to point out the reasons, I would imagine.
At the end of the day, the wealth of nations is broadly at stake.
Current German leadership is smartly aware of it and has therefore chosen to keep a low, meek profile while reaping the rewards from multiple sources.

2.Germany has indeed been the one country to have profited the most from the Euro and globalisation of trade as has taken root. Eurozone woes remain as structural as ever with southern European nations struggling to get out of a very tight spot, mainly the regions' smaller economies. All has been said and written about the imbalances within the Eurozone but so far none has been addressed in earnest. Remarkably, to this day the view from Berlin is entirely different!

3.Tellingly, the world's most ardent supporter of globalisation is China, likely the single country to have benefited the most from it. Germany dug in solidly in an enlarged EU single market and selling China every capital and premium goods it wanted to buy.

Whatever the arguments made by the new American administration, I am in no doubt - and have been in a long while - that something has got to change to restore critical balances in trade flows around the world.

TEc - Fuel Folly - elevating risk to the highest level

Every air accident is a sad event - or any accident for that matter - but this one is sadder than most. The facts are pretty much exposed and hardly anything further is needed to reach a crystal clear conclusion: there can be no cutting corners when it comes to aircraft and flying. It is as simple as that, a longtime established fact - indeed since the dawn of aviation - that DOES NOT require any evidence whatsoever.
Because when it does show it takes the form of outrageous tragedies such as this one.
Then, there is the usual set of contributing fateful factors.
An accident that should never have been in the first place.

Flying remains the safest mode of transport by far, by all measurable accounts. But it is bound to fare the worst when human recklessness kicks in regardless of all else.

Precious lives have been cut short on a hillside in Colombia very close to their intended destination.
In this particular case, BASIC common-sense SAFETY was grotesquely bypassed. It cannot be underlined enough.

As always, there are accidents and accidents. Common to all is that every single one demands factual analysis to determine causes, contribute to further learning and importantly, prevent future recurrences.

TEc - The road to Brexit - Which road will it be?

Brexit is the topic of the day for learned opinion-makers as well as laymen across the length and breadth of the United Kingdom of Great Britain and Northern Ireland.
As it is the political fallout has been immense following a popular decision whose economic repercussions are beginning to sink in. The value of pound sterling is up to now the major practical barometer of things to come in a worst-case-scenario.Words such as hard or soft are commonly used to gauge the wide gap of possible consequences to the British economy.At the end of the day my own assessment indicates that it very much remains very early days to substantively assess anything at all. Even the currency's crash may be down to nervousness rather than a perceived deterioration of the UK's future trading conditions.Why then the rush of bad news when hardly anything is known about the UK's future relationship with the other 27 countries of the European Union? As the current UK government feels the ground ahead of invoking Article 50 of the Lisbon Treaty, the European Commission and several heads of government have publicly voiced their views.I am ever amazed at how unprepared hardline Brexiteers seemingly were about their case as much as the apparently orchestrated punishing statements made by leaders of Europe's other relevant nations hellbent(?) on exacting an expensive price on Britons for their irresponsible folly(?).Few seem to take the moderate constructive path that will ensure a positive outcome for UK citizens, European citizens at large and, above all, Europe as a geographic, cultural, economic and military bloc. Yet, that would seem to me the only acceptable way forward in the new context.If Democracy is the foundation, the cornerstone of the European edifice then it need be fully upheld and respected especially so when outcomes do not conform to the expected. Such is the case after the In/Out UK referendum result became known regardless of late discussions about the merits/demerits of calling for one on an issue as complex.The UK's future is neither as bleak as some are painting it to be nor as rosy as others would wish the rest of us to believe.Voting to quit the EU was a deeply political choice with major economic and social implications.Politicians on both sides of the Channel must rise up to the challenges and hammer out the best deal for the UK and the remaining 27 members of the EU.A potential lose a lot-lose something must be turned into a win-win for the benefit of Europe as a whole.

TEc - How to not spend it - Norway's style of handling of wealth

There is so much countries around the world can learn from Norway.
Despite sitting atop a massive pile of cash Norwegians take the long-term approach to managing their natural bounty. Prudence seems to be the key word that garners widespread support among citizenry, decision-makers and most politicians alike.
Suggestions on how best to invest revenue from such a mountain of capital, or part of the capital itself, will always swirl around but to this day cautious, should I say wise, management of the Fund has prevailed.
Of course this bodes well for future generations of Norwegians and Norway as a country/State.
Through the highs and lows of oil prices and its eventual depletion, through the thicks and thins of Norway's collective economic life, the mammoth sovereign-wealth fund has been, is and will continue to be a source of national strength and reassurance.
For now it remains in very safe hands whose rational minds have steered the Fund to ever greater heights!

TEc - GDP forecasts for 2016 - what should we make of forecasts?

Forecasts by and large remain truthful to themselves only. Forecasts they are and should thus be taken at face value, no more no less.

In the recent past so-called credible institutions produced heaps of forecasts that soon proved to be grossly erroneous misleading professionals and commoners alike.
I have come to believe that such predictions and the frequency of their release aim to become pressure tools rather than the mere hypothetical pointers that they will forever be.

TEc - May time - A new PM takes over

TEc has made it crystal clear where it stood before and after the referendum. As a specialist newspaper on matters pertaining to the economy its dominant line is unapologetically tilted away from pure politics.
Yet the new PM faces the daunting task of gathering many tasks together to then arrive at sensible policies acceptable to both the EU and the UK as a whole. Most of them inherently political in nature. Scotland and Northern Ireland, despite their scale and specificities, cannot be side-stepped at any point in time. A first signal was already given by TMay's early visit to Edinburgh.

The question mark that looms large is whether or not the UK's relevant sticking points are compatible with a EU whose main tenets consistently jeopardise those very points.
Can they ever be made compatible?
My point is that they have to.
The UK is important enough to continental Europe to turn it into a mere case of conditioned access to the single-market. Conversely, the EU, for all its current failings as seen by hard-line Brexiteers, is critical to the UK far more than the 450M+ internal consumer market would suggest.
This is why I can only envisage high Politics eventually taking centre stage during negotiations regardless of how hard or protracted.
When it comes to the nitty gritty of actual decisions being made both sides must bear in mind their relative weight set against a far larger backdrop of European peace, security and the welfare of citizenry across the UK and the EU.

TEc - Theresa May and Andrea Leadsom vie to become Britain's next PM - tough job looming

´Political science in the making´ would be a good label for the fallout from the In/Out Referendum.
150.000 Conservative party members will now decide between two women who backed the opposing sides of the argument. The winner will have the unenviable task of delivering on any number of fronts for the greater good of the UK.
For all the relevant cabinet experience that they may have, at the end of the day it should matter politically the very views each held during the campaign. The result may also show the depth of anti-EU feeling among the party faithful - irrespective of the Parliamentary group - or their wish to soften the stance in view of post-referendum consequences to the British economy and society already felt.
Bottom line is the UK has placed itself in a reasonably tight spot. One that calls for the leadership to show a fair amount of pragmatism, knowledge and ability to compromise. They will have to sail the country through what may only be described as unchartered territory where headwinds are likely to be met.

TEc - Tragic split - UK goes it alone. To uncertainty...

No doubt Europe is witnessing a very sad day. One that could have been avoided if only, at European level, a lot more respect were shown by EU officials towards the common peoples of Europe.
The structures of an evolving European Union whose political goals have all but been lost to the strains of globalization, also lost touch with the very peoples they purport to serve. The defeat of Remain is as much the fallout of domestic issues as it is about the failings of the EU despite Britain's already significant aloofness.
The UK is known to be a rather peculiar case indeed since applying for membership of the Common Market back in 1963. Twice snubbed by deGaulle the island nation would finally join in 1973 to hold a confirmation referendum only just two years later.
But the unease has prevailed throughout and is best exemplified in the many Opt-outs the country negotiated on core EU policies.
To my mind, an In/Out referendum was therefore inevitable. It would always be a matter of time before widespread feelings of mistrust towards the EU - stoked by an inflammatory, parochial and irresponsible tabloid media - would find echo in the political establishment. Everything made worse by the surge in net migration into the UK especially from 2004 and 2007 when two EU enlargements took on mostly eastern european countries.
DC hardly had a choice. If he did not push for a vote somebody else would sooner or later.
Time now to move on.
Having lost on an existential issue in a high turnout vote with a relevant gap between the options left him no alternative but to step down immediately. He has done so gracefully following a very high-stakes gamble the Remain camp never made the full case for.
A new chapter opens up today for the UK and the EU.
There will be short-term pain but only time will tell whether this has been the wiser choice made by the British people.

TEc - Indian solar power - an overblown numerical ambition or a real target?

This is a very very tall order by any stretch of imagination. As tall as you can have them. Optimally achievable it may theoretically be but I would rather rate the target as an intentional overblown numerical ambition. Anything close to it by 2022 will amount to a staggering victory.
I will then wilfully take my hat off to all who have today upped the stakes this high.
Leading and showing the way forward is paramount for any government. I do think that the skies over India have never been sunnier too.
However, there are also some considerable odds that call for realistic optimism barring which generously set targets, if recurrently missed, are no more than discredited hollowed out numbers.