China releases its highly-anticipated economic growth data for the fourth quarter on Monday – numbers that are expected to show 2013 marked the weakest performance for the world’s second biggest economy in 14 years.
Many economists forecast China’s annual gross domestic product (GDP) slowed to 7.6 percent in the final three months of last year, from 7.8 percent in the previous quarter.
That would put the full-year growth rate at 7.7 percent, above the government’s 7.5 percent official target but mark the weakest level since 1999.
David Cui, Head of China Equity Strategy at BofA Merrill Lynch, explains why mainland markets are likely to view next week’s GDP figure in a negative light, no matter what the result is. Here is a direct video link.
See also: China crisis may be unavoidable for some excellent perspective on China’s debt bubble. The greatest global credit bubble in history stole demand from the future and left the burden of debt payments in its place. Much weaker global growth is the price now to be paid for some time. Proving yet again that debt is no free lunch:
It is clear that policymakers in China are focused on engineering a transition to slower but more sustainable growth without causing a sharp cyclical slowdown. From an empirical perspective, however, the number of economies that have historically succeeded in letting the air out of a credit balloon in a gradual fashion, without creating a credit crunch and a short-lived recession, cannot be counted even on one finger.
Whether China will be different, given its unique policy tools and central planning instruments such as quantitative credit controls, is yet to be seen. Nevertheless, policy intervention comes with costs, mostly higher and more convoluted than anticipated.
One thing is certain: The consequences will be profound and long lasting for global economies and investors.
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I will be speaking at the Cambridge House World Investment Conference this Sunday in Vancouver at the beautiful Canada Place Convention Center, with presentations at 8:30 am and 1:00 pm. You can register to attend or learn more about the show here.
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As the Stern report concluded in its extensive study on the math of climate change in 2006, the economic costs of doing nothing to curb our human contribution will be higher than the cost of preventative steps needed. The Stern commission estimated then that the negative impacts of global warming could cost the world as much as 20 percent of economic output, compared with the 1 percent cost of proactive steps to contain the problem. A new UN report this week comes to a similar finding, see Climate Protection may cut world GDP 4% by 2030, Un says:
The cost of holding rising temperatures to safe levels may reach 4 percent of economic output by 2030, according to a draft United Nations report designed to influence efforts to draft a global-warming treaty.
Most scenarios that meet the 2-degree Celsius (3.6-degree Fahrenheit) cap on global warming endorsed by world leaders require a 40 percent to 70 percent reduction in heat-trapping gases by 2050 from 2010 levels, according to the third installment of the UN’s biggest-ever study of climate change. The world would need to triple the share of renewables, nuclear power and carbon-capture and storage to meet that goal.
We are already paying the costs of inaction today all over the planet through increasing hardship, waste and environmental adversity. And its not just issues of temperature change that are a factor here (yes, yes, I know, some readers don’t believe the earth is warming). Degrading air quality is a huge cost to global health and function. Just ask China how good it is for business to have repeated “stay-in-door” days thanks to intolerable air pollution. See: North China smog prompts second-day warnings to stay indoors. Anyone for proactive steps rather than just suffering the consequences and treating the illnesses?
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