Differential effects of the financial crisis
Posted by Helena Cobban
October 27, 2008 7:03 PM EST | Link
Filed in China , Economic crisis , Global economics
I've been arguing for a while now that the present crisis of the western world's "casino capitalism" will have much less of a total impact on China, India, and other big economies that have not yet taken the (as we now see) extremely risky step of deregulating their financial systems and thereby allowing/encouraging the growth of highly leveraged and often quite non-transparent derivatives markets.
On Friday, the NYT had a fascinating graphic that seemed to illustrate this point excellently. (Sorry I can't embed it right now. I've forgotten how to do the resizing that would be needed.) It's a scatter-chart produced by the London-based investment bankers Dresdner Kleinwort, plotting various "emerging market" countries according to DK's estimation of their "financial vulnerability", along the x-axis, and their "macroeconomic vulnerability", along the y-axis.
Anyway, even a cursory glance at the graphic shows that DK's analysts judge that Brazil, China, India, and Russia all have low "macroeconomic vulnerability" to the crisis. Those judged to have a lot are Mexico, Czech Republic, Hungary, Estonia (at the very top of the chart), Latvia, and Iceland.
Regarding financial vulnerability, Russia and India have notably more than China or Brazil.
I wanted to find out more about the methodology the DK analysts used in composing this chart-- and I hoped they also had one that gauged the MV and the FV of the world's big developed markets, too.
Actually, DK itself has fallen prey to the financial vulnerability of both Germany and the UK, where it has significant operations. Back in early September it got taken over by Germany's largest bank, Commerzbank, which immediately fired DK's chief exec and announced that 1,000 more of its 2,000 London-based employees would soon also be facing the chop.
I noodled around DK's website a bit more, looking for some more open-source research products. I found none at all. The press page still contained links to many slightly outdated, very self-congratulatory plaudits about how deeply DK had been involved in various sectors of the derivatives markets. The press page is headed by a fashionably cropped image of a tulip.
Tulip, huh? Prescient or what?
And regarding another item in the "rise of China" file, I see that in 2012 China is set to overtake the US in the number of patents filed annually.
China may not suffer a lot from the financial crisis, but my bet is that the recession will be difficult. Their growth has been export driven, and demand is set to contract dramatically.
Yes, but I think the present crisis of western casino capitalism will merely accelerate the push the CCP leaders have already been making to invest more of their resources in developing their own highly underdeveloped interior, and their "near abroad" neighbors... which will make their relative economic position even stronger than (and more decoupled from) those of the risky western nations than it is now.
Your information on China's patents comes a few days after an article in the Guardian, by Will Hutton, claiming precisely the opposite- an almost racist rant denouncing China for its uninventiveness etc.