China Driving Engine of Global Economic Growth

Featuring Michael Howell

Michael Howell analyses capital flows and the creation of liquidity, particularly in regards to China, to develop a greater understanding of how the financial world works. His study of capital flows is unique and rarely discussed, illuminating the economics and interdependence of countries in Asia, to draw some fascinating conclusions on the prospects for growth and currencies in the region. With a contrarian view on the US dollar, Michael takes a long term perspective and plots the impact on the bond market from the flight of Chinese capital.

Published on
23 December, 2016
Topic
Structural flows, Liquidity, China
Duration
35 minutes
Asset class
Currencies, Bonds/Rates/Credit
Rating
36

Comments

  • VK

    Viresh K.

    24 6 2017 23:46

    0       0

    such a good video. so many topics covered

  • sw

    stefan w.

    2 4 2017 14:07

    0       0

    ...ich was credit driven. Glossing over the desire of Chinese people with wealth to take their RMB out of China (regardless of whether C govt can control) seems like a big omission re implications...

  • sw

    stefan w.

    2 4 2017 14:04

    0       0

    Agree w concerns re US10 yr. Disagree with faith-based China optimism premised on Xi (whose name he can't pronounce) steering the ship. 2016 PPI was commodity driven, which was central bank driven, wh

  • WE

    William E.

    5 1 2017 14:19

    3       0

    Completely agree about adding back date stamp! Please remember, that vocal complaints of few (including this one if at odds with your data) should not kill good standard practice. Great discussion and as always thank you for the great work.

  • jm

    jim m.

    5 1 2017 04:09

    0       0

    agree that the u.s. 10 year is expensive given his preferred term premium metric. agree inflation is a global phenomena. agree chinese ppi uptick is inflation supportive. agree china is picking up partly due to one belt one road. agree yuan is cheapening. agree jap yen cheapening. am unclear on his call dxy has peaked. hoping that is wrong. good speaker. thanks.

  • AE

    Alex E.

    4 1 2017 03:22

    1       1

    With all due respect, I heard a LOT of assumptions in this piece! Trump has stated that he will label China a currency manipulator as one of the first things he does upon taking office. What do you think China's reaction will be given that punch in the face? How about a 30% deval to give Trump an upper cut. Trump will impose tariffs on Chinese goods. Bad for China, America and the rest of Asia. Trump will schmooze Russia to try and break up that cozy little relationship. China is worried but not showing it yet, but Trump's phone call with the Taiwan President was a shot across the Communist Party's bow. This is going to be a really interesting year!!

  • IH

    Iain H.

    3 1 2017 06:13

    0       0

    May be brighter minds than mine could explain how rates can raise significantly given the level of debt that exists today?

  • CJ

    C J.

    2 1 2017 19:19

    9       0

    This piece is littered with factual inaccuracies. After checking their disastrous performance of their funds on their website, it makes perfect sense. Maybe a disclaimer would be appropriate.

  • PP

    Peter P.

    29 12 2016 22:59

    4       0

    I saw that Chinese PPI went from -6% at start of 2016, to finally cracking positive in Q4...BUT...China engineered both a higher coal price via stimulating demand & restricting their own supply by cutting miners working days...they raised prices on their basic unit of energy and imported coal to boot...So China managed to raise their PPI (as they promised to do for coal, steel, glass, etc) BUT it went hand in hand with a devaluation of the CNY - track Chinese PPI vs the CNY/$....So, if China needs a weaker CNY to remain competitive they export deflation, not inflation.

  • KB

    Kreso B.

    29 12 2016 19:30

    1       0

    You would have never guessed this gentlenman might want to sell some Chinese bonds?

  • JD

    John D.

    29 12 2016 16:24

    1       0

    I found this well explained rationale of what we've witnessed in the global financial systems in past few years very illuminating. Tracking the flow of funds explains much of what we're seen, and unfortunately it's very difficult for we individuals to do, or understand in real time.

  • KE

    Kenan E.

    29 12 2016 07:46

    1       0

    Interesting piece. But IMHO this guy misses one important point. You cannot successfully manage an economy the size of China's over the long run. So I think there will be more than just a few minor hiccups on China's way into its future. If they want to be successful over the long run they will have to switch to a real free market.

  • IZ

    Ignacio Z.

    27 12 2016 12:50

    2       0

    One Belt, One Road has enourmous similarities to the Panamerican Road. By the way it never got finished, you little bits and pieces all over the place.....

  • RA

    Robert A.

    25 12 2016 01:19

    2       0

    REALLY enjoyed this one. Curious how Raoul feels about some of these assumptions as Raoul seems firmly in the strong US $ camp. Excellent pithy concise presentation whether he turns out to be correct or not. Thanks RV for getting this point of view to us!

  • WK

    William K.

    24 12 2016 12:34

    1       0

    Consensus is DXY bullish - good to hear a contrarian rationale for why the dollar run is over.

  • XS

    Xin S.

    24 12 2016 05:50

    7       1

    Basically, he is saying Chinese government would be able to control the situation by its financial and political power. So it comes to the trust. all the world would trust Chinese government? and put their wealth into China system? but China system is not rule of law. so if you could get connection with their political power, yes you can. Otherwise, Li, Kaishen has been running away from China since 2013.

  • PK

    Paul K.

    24 12 2016 01:41

    0       0

    Excellent r.

  • T~

    Tshort63 ~.

    23 12 2016 21:53

    48       0

    Did not agree with all of his conclusions but that does not mean he is wrong. Date stamp for when recorded is something we need! Please?

  • ns

    niall s.

    23 12 2016 18:40

    17       0

    I'd like to be able to see when the interview was filmed , this info was available on the old format , but sometimes drew negative comment if the interview was a bit old . Nevertheless its worthwhile information in order to gauge the accuracy of his forecasts. I strongly believe the dollar has not peaked and has already blown past his estimate of the peak.

  • TL

    Tianyun L.

    23 12 2016 18:34

    6       0

    Too conventional for my taste. He is always trying to push through some sort of convergence/equilibrium story, while that is not how the real world works. I am more interested in what Peter Thiel thinks.

  • KG

    Kevin G.

    23 12 2016 17:33

    13       1

    Really interesting piece - especially enjoyed the analysis regarding Chinese capital flows and the PBOC balance sheet. My one pushback would be around the debt levels in China. At ~220% private debt/GDP, China is getting up to the levels where Japan peaked in the early 90s. It's not clear to me why the Chinese would be able to push this further than the Japanese were able to do, especially given the many similarities between their economies.

  • db

    don b.

    23 12 2016 17:16

    0       1

    love the Outlier

  • KC

    Klendathu C.

    23 12 2016 16:14

    0       0

    Aymman, thanks for the anecdote. As bearish as I am, on China, investing in Pakistan/CPEC is a great risk reward play if I'm wrong. #RiskReward

  • KC

    Klendathu C.

    23 12 2016 16:11

    10       0

    I love being told how wrong I am by someone smarter than me. This was really great. Will have to watch multiple times before I can fully digest. I am not a expert on liquidity or China, but I have strong views. China requires ever growing capital surplus just to stabilize its economy. Reserve currency status would require it to run deficits. Therefore timing of Yuan as reserve currency remains far off. Likely need a rerating/phase transition of the Yuan before others accept it as a reserve currency. Once again, thank you so much for sharing!

  • AA

    Aymman A.

    23 12 2016 15:25

    8       0

    Recently visited Pakistan. There are Chinese all over the place. Massive construction according to the CPEC (China Pakistan economic corridor) deal. CPEC is part of the OBOR plan mentioned in this