Last week, Expert Guest, David Stockton, and his colleagues from the Peterson Institute presented their fall Economic Outlook. David is fairly constructive on the economic backdrop forecasting improving global growth, mild inflationary pressures and a steady withdrawal of central bank liquidity. In his presentation, the most encouraging chart is the pick-up in business investment which started mid-2016. Considering many global companies are flush with cash, this could be a real driver of growth if business confidence continues to improve. https://piie.com/events/global-economic-prospects-fall-2017
China watchers have been waiting for months, even years, for the upcoming Party Congress to gauge if President Xi is a reformer, or not. With the pump-priming before the event likely to curtail over the next couple of quarters, we will see very quickly if Mr. Xi reacts by traditional fiscal spending or if he continues this current trend of deleveraging.
Key China Financial Risk take-aways from Nicholas Lardy: Quite constructive
The rapid growth in corporate debt poses risks
This risk has been acknowledged by Xi Jinping and regulators have responded vigorously
Interbank lending, particularly to Non Bank FInancial Institutions, is shrinking
Share of RMB lending to less leveraged households is rising, to more leveraged corporates, is falling
Major risks within the insurance segment are being addressed.
Profitability of SOEs, the most highly leverages of corporate borrowers, is recovering
Key question remains-if growth slows from here, will ultra-rapid credit growth resume?
To make it easier for everyone, Expert Series regular David Stockton's discussion on the US economy commences at 6:45 and Nicholas Lardy's discussion on Chinese Financial Risks starts 29:45