Is China's Economy Growing Again?

For now, China’s economy appears to be strengthening again. Real growth edged down to 6.7% year on year in the first quarter, but that figure, subject to fiddling by the authorities, is treated with scepticism by analysts. Instead, they pay more attention to a range of indicators that tell a different story. First, nominal growth—to which corporate earnings are more closely tied—jumped to 7.2% year on year, up from 6% in the final quarter of 2015. Second, the revival of the property sector—the most important part of the economy—gathered pace: the prices of new homes increased by 3.1% in March from a year earlier, the fastest growth since mid-2014. Third, industrial output rose by 6.8% year on year in March, compared with a subdued 5.4% average over the previous two months.

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Or is it still being overly stimulated?

The Economist Traces SIlicon Valley's Roots to Whaling in New Bedford, Massachusetts

New Bedford was not the only whaling port in America; nor was America the only whaling nation. Yet according to a study published in 1859, of the 900-odd active whaling ships around the world in 1850, 700 were American, and 70% of those came from New Bedford. The town’s whalers came to dominate the industry, and reap immense profits, thanks to a novel technology that remains relevant to this day. They did not invent a new type of ship, or a new means of tracking whales; instead, they developed a new business model that was extremely effective at marshalling capital and skilled workers despite the immense risks involved for both. Whaling all but disappeared as an industry after mineral oil supplanted whale oil as a fuel. But the business structures pioneered in New Bedford remain as relevant as they ever were. Without them, the tech booms of the 1990s and today would not have been possible.

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The Economist on Catalona's Independence Setbacks and a Response

CATALONIA’S referendum on independence, planned for November 9th, will not now happen. Or might it, after all? On October 14th the Catalan president, Artur Mas, admitted that, with the referendum officially suspended by Spain’s constitutional court, it would have to be scrapped. But, he added, some other sort of public consultation will still happen on that day—and it will involve ballot boxes.

Mr Mas refused to provide details. He claimed that he did not want to give the Spanish prime minister, Mariano Rajoy, too many clues about his plans. Given the legal obstacles, even Mr Mas may not be sure how to proceed. Catalonia’s more radical and leftist separatists were angered by his decision to obey the court while calling for a watered-down, pseudo-referendum. They want an early election in this rich and populous region of north-east Spain. Mr Mas is trying to deflect the separatists’ claims of cowardice by ramping up the war of words. “The Spanish state is the adversary,” he declared.

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To The Editors Of The Economist

I am writing this missive addressed to you as I am outraged, nay scandalized, by the level of your reporting on the Catalan question. The source of my discontent are two recent pieces – both signed by one GT – the first of which appeared on the Charlemagne Blog (Getting to “sí”, 19 September 2014), while the second was published under the rubric The Economist Explains (Catalonia’s independence movement,14 October 2014.)

Of the two, I consider the second much more reproachable since it purports to be an informative document, and not a mere opinion piece. My issue with your journalist is not his opinion – to which any journalist is entitled – but that he attempts to pass off opinion as fact. My view is the that the level of journalism being demonstrated is not what you should be seeking in a publication with your high level of international prestige.

At the end of the day, of course, whether this is the case or not is an editorial decision on your part. I fully understand why the Economist originally took the decision to publish non-editorial unsigned articles, but in the modern age I think this be a double edged sword as it leads to confusion about what is an Op-ed and what isn’t. Personally I think the practice is now more trouble than it’s worth, but again that’s for you to decide.

In order to try and demonstrate my case I have gone to the rather tedious lengths of re-reading the two offending articles and identifying what I consider to be factual inaccuracies (see below).

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Low Inflation Woes in the Eurozone?

One thing that the European Central Bank (ECB) does not lack is advice on tackling low inflation. This week the OECD added its voice to that of the IMF in April in urging prompt action, calling for a cut in the bank’s main lending rate, from the already low 0.25% reached in November to zero. The ECB’s governing council, meeting on May 8th (after The Economist had gone to press), was not expected to respond to this plea any more than it did to the IMF’s.The difficulty facing the 24-strong council is highlighted by the euro zone’s differing labour-market trajectories over the past decade (a period during which it expanded from 12 to 18 countries). Whereas joblessness has fallen in Germany, from 10.1% to 5.1%, it has soared in Spain, from 11.1% to 25.3%.High unemployment has contributed to the onset of deflation in parts of southern Europe. But even in northern countries inflation is low, and though it has risen in the euro zone as a whole from 0.5% in March to 0.7%

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The Economist on Russia's Economy

WESTERN measures against Russia—asset freezes and visa restrictions aimed at people and firms close to Vladimir Putin—may be pinpricks, but the crisis in Ukraine has already taken its toll on Russia’s economy and financial markets. Capital flight in the first three months of 2014 is thought to exceed $60 billion. The stockmarket is down by 20% since the start of the year and the rouble has dropped by 8% against the dollar. Worries about the devaluation feeding through to consumer prices have prompted the central bank to yank up interest rates, from 5.5% at the start of March to 7.5%. The IMF reckons the economy is in recession; this week it cut its growth forecast for 2014 from 1.3% to 0.2%.

Despite these upsets, Russia appears to hold strong economic as well as military cards. It provides 24% of the European Union’s gas and 30% of its oil. Its grip on Ukraine’s gas and oil consumption is tighter still. That makes it hard for the West to design sanctions that do not backfire.

Russia’s public finances are also much healthier than those of many of the countries against which it is pitted over Ukraine. The budget deficit was 1.3% of GDP last year, whereas it stood at 3.3% for the EU. Government debt amounted to a mere 13% of GDP, compared with 87% in the EU.

Among emerging economies, Russia appears to have stout defences to withstand external pressure. New estimates of GDP evaluated at purchasing-power parity exchange rates from the World Bank (see article) show that in 2011 it was the sixth-biggest economy in the world on this measure, only just behind Germany. Thanks to its huge energy exports, Russia’s current account is in surplus, forecast by the IMF to be 2.1% of GDP in 2014. In contrast countries like Turkey and South Africa, which took a battering earlier this year as investors worried about fragile emerging economies, are projected to run deficits of 6.3% and 5.4% respectively.

A long history of such surpluses has enabled Russia to amass impressive foreign-exchange reserves, which stood at $486 billion in March. According to the IMF these reserves are four times as high as its external-financing requirement—the rollover of external debt less the current-account balance—in 2014. Turkey’s reserves cover only half of its requirement.

Despite these strengths, however, the Russian economy is far from invulnerable. Not all the reserves are available for intervention, since $175 billion are earmarked in two wealth funds which cushion the budget and cover future pension spending. If capital flight continues at its current rate, the central bank will face a harsh choice: it can either expend its reserves to keep the rouble stable or allow the currency to drop, which will add to inflation and could precipitate a domestic banking crisis.

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Why One Economist Reporter Does NOT Think China is Headed for an Economic Crash

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The Economist Critiques Bitcoin

BITCOIN, to its most ardent fans, is more than a useful way to pay for drugs. It is also a technological marvel that could disrupt much of the consumer-finance industry. But is it money? The Bitcoin economy keeps growing, despite the periodic disappearance of large quantities of currency in hacker heists. The total value of Bitcoins in circulation has risen to $7.9 billion, from just $490m a year ago, while daily transaction volume is up by almost 60%. If Bitcoin aspires to match dollars and euros for money-ness, it will need to be more than just a Mastercard for nerds.

Economists reckon money is anything that serves three main functions. It must be a “medium of exchange”, which can reliably be swapped for goods and services. It should be a stable store of value, enabling users to tuck some away and come back later to find its purchasing power more or less intact. And it should function as a unit of account: a statistical yardstick against which value in an economy is measured. The American dollar meets all three conditions. Bitcoin has some way to go.

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Economist Highlights Problems in BitCoin Exchanges Like Mt Gox

IN MOST businesses, a small coding error is a minor problem. With Bitcoin, an online “cryptocurrency”, a fairly simple flaw seems to have cost $5.3 billion. That is how much the value of all of the Bitcoin in the world has fallen over the past two weeks, after a bug caused several Bitcoin exchanges to halt withdrawals temporarily. The price of a Bitcoin, which peaked at about $1,200 in December, is now about $630 on Bitstamp, one of the exchanges that has resumed trading. On Mt Gox, another exchange based in Tokyo, coins that still cannot be withdrawn are selling for far less.

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