A recent side-by-side comparison of the U.S. and Chinese economies produced a startling result: There were $34.8 billion of initial public offerings in China this year and only $13.7 billion in the U.S.
With numbers like that, is it any surprise that Western fund managers are scrambling to get a bite of the immensely profitable Chinese market for new companies? As the New York Times reported, U.S.-based Blackstone Group has formed a partnership with Shanghai’s municipal government to raise a $732 million private equity fund.
What’s different this time is that Blackstone’s fund is denominated in the Chinese currency, which is officially called the renminbi. Blackstone’s idea is to take advantage of capital from China’s increasingly wealthy institutional and private investors. The fund will then use the investments to buy companies and take them public, earning a hopefully large profit along the way. There is plenty of interest in the Chinese market for new companies—Carlyle Group announced this week that it had invested $60 million in three Chinese growth companies. So there is no shortage of domestic companies ripe for turnaround [Source].
The economies of China and India are set to grow by more than previously thought in 2009, the Asian Development Bank (ADB) has said [Source].
Furthermore, when the chairman of the Federal Reserve, Ben Bernanke, told a Washington think-tank this month that “the recession is very likely over at this point”, he was careful to add that the American economy would remain weak for some time yet. Analysis released on Tuesday September 22nd by IMF economists who have been studying the aftermath of 88 banking crises over the past four decades, supports Mr Bernanke’s cautious talk. While most discussion of the worst recession since the Depression looks at the immediate pain from lost jobs and shuttered shops, the IMF analysis suggests that the effects of the downturn will be felt long after it is technically over [Source].
Economic and financial globalisation and the expansion of world trade have brought substantial benefits to countries around the world. But the current financial crisis has put globalisation on hold, with capital flows reversing and global trade shrinking.
Some analysts see the drivers of the recent globalisation wave getting undermined, with protectionism on the rise.
Even supporters of globalisation agree that the benefits of globalisation are not without risks—such as those arising from volatile capital movements. The IMF works to help economies manage or reduce these risks, through economic analysis and policy advice and through technical assistance in areas such as macroeconomic policy, financial sector sustainability, and the exchange-rate system.
This report (PDF) pulls together the IMF’s work on globalisation and includes links to key articles, documents, and background information.
Emerging market countries are facing increasing difficulties around the world because of the spreading global economic crisis, with demand falling for their exports, investment slumping, and cross-border lending drying up.
As the crisis becomes more prolonged, a growing number of emerging economies will find room for policy manoeuvre becoming increasingly limited, and large-scale official support is likely to be needed from bilateral and multilateral sources.
Overall, risks are largest for emerging economies that rely on cross-border flows to finance current account deficits or to fund the activities of their financial or corporate sectors. Countries with pegged exchange rate regimes may have little scope for interest rate cuts to the extent that the crisis has put sustained pressure on their exchange rates.
Foreign direct investment is set to slow significantly, given the fall in private equity assets, the lack of credit available to finance acquisitions, and sharply deteriorating growth prospects in emerging markets.
This report (PDF) highlights the main policy issues facing emerging market economies, and IMF action to support its emerging market members.
Despite continuing concerns about corruption, red tape, and political instability, it’s suffering far less from the financial crisis than other parts of the world. Some companies operating in the region continue to do well, as demand for everything from computers to discount airline tickets remains strong.
Southeast Asia’s strength is an encouraging sign that the region is still a player. Though it may have been half-forgotten by many investors since the crisis, its educated workers, natural resources, and—in some countries, at least—first-class infrastructure make it worth paying attention to. ASEAN has a total population of 560 million, and its combined gross domestic product of $1.3 trillion is greater than India’s.
Indonesia, Thailand, Malaysia, the Philippines, Vietnam, and Singapore—which account for about 95% of the region’s economy—attracted nearly $50 billion in foreign direct investment last year, vs. China’s $92 billion [source].
From the ruins of the credit crunch, a new financial order will emerge. Its shape is not yet known, but is already hotly debated. Will there be a new model for investment banking? The socialisation of risk? A return to Keynesianism? What role will hedge funds and private equity play? And government and regulators?
In this series of exclusive video interviews, Lionel Barber, editor of the Financial Times, talks to some of the chief protagonists – bankers, policymakers, financiers – and asks them to explain not just what happened, but also how they think finance will adapt to the post-crash world.
The globalisation of entrepreneurship is raising the competitive stakes for everyone, particularly in the rich world. Entrepreneurs can now come from almost anywhere, including once-closed economies such as India and China. And many of them can reach global markets from the day they open their doors, thanks to the falling cost of communications.
The world’s greatest producer of entrepreneurs continues to be America. The lights may have gone out on Wall Street, but Silicon Valley continues to burn bright. Entrepreneurship also flourishes in clusters. A third of American venture capital flows into two places, Silicon Valley and Boston, and two-thirds into just six places, New York, Los Angeles, San Diego and Austin as well as the Valley and Boston.
The information age is making it ever easier for ordinary people to start businesses and harder for incumbents to defend their territory. Back in 1960 the composition of the Fortune 500 was so stable that it took 20 years for a third of the constituent companies to change. Now it takes only four years. Source
Wanna see how the recession has affected GDP, house prices, rates and inflation. BBC published an analysis on stock markets and government rescues here (Global Downturn). In light of this the Financial Times has published a special report on how to fight a global downturn here (Managing in a Downturn).
The Euro will celebrate its 10th anniversary next month, defying doubters but facing the greatest challenge of its young life as the global credit crisis spreads. Read more.
Launched in January 1999, the economic and monetary union now encompasses an area that includes 320 million people and 15 countries, ranging from economic powerhouses France and Germany to Cyprus and Malta.
But economists note that many of the pitfalls that fostered skepticism of the euro still exist. And they will be amplified in coming years as Europe and the world deal with the biggest financial crisis since the Great Depression. Source: MarketWatch Special Report The euro at 10
Global economic meetings used to mean the G7 and then the G8. However, last weekend marked the emergence of a new phenomenon the G20. Which have set stage for the beginning of a better multilateral economic system.
It used to be a rich-country affair with Russia invited in during in the 1990s – but that was to tackle international political issues, not for the sake of a contribution to the economic discussions. However times have changed. A global economic problem needed a presence from developing country leaders.
This being said. In light of aforementioned, last weekend, Presidents and prime ministers from a score of rich and emerging economies descended on Washington, DC, ostensibly to remake the rules of global finance. They came to Washington, as countries hit by the developed world’s financial crisis and, in some cases, as countries that might be able to help fix it.
The G20 (more formally, the Group of Twenty Finance Ministers and Central Bank Governors), created after the emerging-market crises a decade ago, is not perfect for today’s problems. It excludes a big economy with an admired system of financial regulation (Spain) but includes a mid-sized country that has become irrelevant to global finance because of its own mismanagement (Argentina). Still, the G20 includes most of the key parts of the rich and emerging world, making it a better forum for global economic co-operation than the G7 group of rich countries, which has until now held the stage (Source: The Economist).
A recapitulation and highlights of the G20 meeting can be found here:
- BBC News: G20 summit: In quotes
- BBC News: G20 declaration: Full text
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