Salient to Investors:

Fareed Zakaria said:

  • Unlike most developing nations, China spends little on subsidizing current consumption but spends massively on export-free zones, highways, rail systems and airports.
  • No developing democracy has been able to ignore short-term political pressures and execute a disciplined growth strategy with such success.
  • China’s growth has fallen faster and deeper than many had predicted and could slow further because China’s authoritarian system has made significant mistakes in recent years.
  • China’s huge expansion of credit and massive stimulus program since 2007 have created dangerous imbalances. To economists, the solution is obvious. Stop favoring state-owned behemoths and exporters, open up the economy, encourage the Chinese people to spend more money at home.
  • Entrenched industries and sectors will resist any Chinese reforms – countries are very reluctant to impose short-term pain for long-term gain, but China had been the exception.
  • The American private sector is extraordinarily resilient.
  • Tom Friedman says that Mexico could be one of the 21st century’s big economic successes.  But there are signs that President Nieto’s honeymoon is coming to an end. One example is Pemex’s monopoly over Mexico’s oil and gas – an ailing, failed enterprise with below-par production and corruption.

Zachary Karabell at River Twice Research said:

  • The US economy is muddling through, which is not bad given where it was 4 years ago, but it certainly won’t implode and should provide the space to deal with health care, immigration, and wealth inequalities.
  • Business confidence is one of the great canards that business leaders use as reason for not spending – a few years ago, it was Washington that was the excuse in holding back spending. There is less investment because businesses are making a lot of money without investing either heavily in infrastructure or in hiring.
  • China by design is in a managed transition from an exports and manufacturing and infrastructure led economy to a consumer led economy. Either the transition will implode, or the China will capably manage the transition.

Rana Foroohar at Time  and CNN said:

  • It is a bifurcated recovery in the US: if you strip out the government and the public sector, growth would be closer to 3%.
  • It will take 15 more months to reach pre-crisis job creation. 8 out of the 10 fasting growing categories of jobs tend to be low-paying.
  • The energy sector boom will create a boom in manufacturing.
  • The growth prospects of America’s top companies are disconnected in some ways from America itself because they are globally hedged.
  • Cautiously optimistic on China as they are willing to endure short-term pain in order to make the transition to a consumption economy.

Glenn Hubbard at Columbia said:

  • We have a fiscal policy which is oriented toward near-term austerity, but not about solving long-term problems.  The near-term deficit news is positive, but, the long-term news is still bad.
  • The history of governments managing difficult transitions like China’s is mixed and there is a real risk in the Chinese financial system.
  • Europe can keep muddling through but at a great cost – recession and shambolic labor markets – and there is a failure to deal with long-term issues and an excessive focus on short-term fiscal issues.
  • The problem for Europe and the US is not today’s budget situation but a glide-path toward a better budget situation – politicians are more willing to put the economy in a recession than to really tackle serious long-term problems.

Ed Luce at the Financial Times said:

  • Short-term austerity in the last 18 months has slowed the US recovery unnecessarily, which in turn has had a deleterious impact on the deficit, and so is self-defeating.
  • China clearly knows what needs to be done.
  • In Europe you are seeing more coalition governments, weaker governments and the rise of anti-politics in Italy, France, Britain, in many places. Fascism has had its day and, except in places like Greece, is no longer a significant force.

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