james @gk: what PBoC does could end up being as just important as what the Fed does
--- voilà, il est temps d'updater vos bookmarks si ce n'est déjà fait: http://www.pbc.gov.cn/english/ article: http://gavekal.com/ ---
As Charles recently highlighted in The US Current Account Deficit - Part Deux, the crisis we have just lived through is unique. As in previous economic crises, the Fed slashed interest rates and unleashed a large amount of liquidity into the system, but unlike the past slumps, the US consumer did not take this liquidity and push it abroad through a widening US current account deficit. Instead, the US consumer and US financials used this money to begin repairing their balance sheets. Simply put, for the first time in a generation, the US current account deficit is not proving to be a key provider of liquidity to the rest of the world.... Instead, as we highlighted in What Will 2009 Be Remembered For?, China is. And for the first time, China, not the US, is leading the global economy out of recession. Which means that China, in this cycle, is the provider of liquidity to the rest of the world, whether through a narrowing of its trade surplus, investment in other countries' infrastructure (e.g., China's recent purchase of US$1.5bn in bonds of Indonesia's Bumi Resources), the purchase of foreign assets (typically in the materials/energy space), the signing of long-term contracts (with Australia for natural gas, with Saudi Arabia for oil, etc...). And thus, this time around, keeping an eye on what the PBoC does could end up being as just important as what the Fed does.
In the past, we have highlighted how China could tighten just as easily through administrative measures (e.g., anti-corruption drives, or anti-speculative measures in the property market such as raising the minimum deposit for housing purchases), than through monetary policy. […]
