Xiaochun on the Chinese Economy

The Chinese Economy has received a lot of attention in the past six months and not in a good way. Most are worried that the wheels are coming off. No doubt, this story will be closely watched for the rest of 2016. But there has always been some hype on the slowdown. For all intensive purposes, the economy is still strong and resilient and this is what the Head of the Chinese Central Bank Zhou Xiaochun also feels in this wide ranging interview with Caixin.

There are indeed differences in the views of the economic situation and financial market developments. It is necessary to analyze the current state of China’s economy in a comprehensive and objective way. Overall, the performance of the economy remains within a reasonably strong range. Against the backdrop of a slowing world economy and global trade, and heightened fluctuations in the international financial markets, China maintained a growth rate of 6.9 percent in 2015, still relatively high compared with other countries.

The change in China’s growth rate can be attributed in part to weak performance of the global economy. It also reflects the structural adjustment policies adopted by the Chinese government. Such a change is conducive to the ongoing efforts in China to pursue more sustainable and quality growth and is beneficial to the rebalancing of the global economy. Going forward, China will strengthen structural reform, especially supply-side reform, in order to strike a better balance among economic growth, structural adjustment and risk prevention, and to achieve sustainable and steady development.

Angus Deaton – CFR

A wide-ranging and insightful conversation/podcast with recent Nobel Laureate – Angus Deaton is worth listening to for so many reasons. A brief snippet of his views on Philantrocapitalism and their impact on development which is very very hard

It’s complicated. I think one of the things that billionaire philanthropists are discovering is it’s actually very hard to give money away in an effective way—in a way that you really believe is improving the world. And actually, that it’s hard is the right answer, right? And the worst thing, I think, about the effective altruism movement is it pretends it’s not hard. It says we have a magic solution which will really help you do this. And the trouble with magic is, it only exists in Harry Potter novels. You really can’t use magic to make the poor of the world less poor.

which he also weaves in his thoughts on RCTs (which were skeptical at best)

And, you know, evidence accumulation is really hard. It requires serious scientific effort. We’ve got to connect up all the things we know. There is no magic bullet. And so the effective altruism, which is—you know, there are sites like GiveWell and others that are listing, if you’re a philanthropist, you know, here’s where you should give your money, and they’re all things like that. They’re things that have been shown to work in one place, often under disputatious circumstances. But, you know, the idea somehow that if you did a randomized control trial and it’s true in one place it must automatically be true somewhere else is nonsense, and I think they’ve just walked into that trap.

 

End of Economic Growth?

Robert Gordon’s new book on economic growth and its future has been received tons of press and it looks like a pathbreaking read not the least for what Gordon is arguing – that the world will see less and less economic growth going forward. Though eminently contestable, the thesis is by no means new. Several other thinkers have argued as such in the last few years namely Tyler Cowen and Peter Thiel, both of whom lament the state of innovation in the world today. Couple of interesting links on Gordon’s book below here

A insightful podcast and conversation of Gordon and Jeff Sachs (who commends the book but disagrees with the thesis) and a good review by Ed Luce in this weekend’s FT Magazine. Paul Krugman in his review in NY Times praised the book; here’s a snippet from his review.

Is he right? My answer is a definite maybe. But whether or not you end up agreeing with Gordon’s thesis, this is a book well worth reading — a magisterial combination of deep technological history, vivid portraits of daily life over the past six generations and careful economic analysis. Non-economists may find some of the charts and tables heavy going, but Gordon never loses sight of the real people and real lives behind those charts. This book will challenge your views about the future; it will definitely transform how you see the past.

What to do with the Rupee?

Rajiv Kumar has a blistering column in the Indian Express of India’s Exchange Rate taking issue with Raghuram Rajan’s recent comments that he prefers a stable, not undervalued, exchange rate for the Indian economy. Ostensibly, his comments were driven by a need to have a stable rate that advances price stability in the economy allowing individuals to makes investments as they see fit. No doubt, this also favours those vested interests, Banks, Financial institutions and other companies that have heavy foreign debt obligations. Kumar begs an answer to Rajan’s comments which he sees as counterproductive given that India’s exports have declined over the past few years. Kumar has a point, a certain decline in the Rupee will favour those SME’s that are already operating in a difficult global economy.

m_id_453805_indian_rupee

But the problem is this: once you start to devalue how much control will you have over the process? And even if you devalue, will Indian industry and SME’s use that to propel their exports? Answers to this question are not clear. The exchange rate, right now, is not high enough to prevent export-led growth yet Indian industry has not really responded so there is no certainty that it could happen in the near term should the Rupee slide. In this context, Rajan perhaps prefers stability over uncertainty in an international economic environment that is far from stable. But the politics of this is also interesting – Rajan’s independence and penchant for openness has already irked the government, especially Modi and Jaitley, which begs the question – Will his term be extended come 2017?

Conversations with Tyler

Tyler Cowen has become probably the most respected and followed scholar-blogger. Marginal Revolution is one of the frontline places to visit for accessible and policy-relevant posts and comments on contemporary economic and political issues. Now Cowen has begun a podcast series that is equally stellar – Conversations with Tyler. Several episodes have been broadcast with genuinely interesting people, not just scholars. The most recent one with Kareem Abdul Jabbar, the public intellectual, is a must watch/hear.