1. Ruchir Sharma makes an important point about why China's financial market power remains still-born,
The hurdle is trust: foreigners are wary of a meddling state, but more importantly, the Chinese distrust their own financial system. China has printed so much money to stimulate growth over the past decade, the money supply now dwarfs the economy and markets. That capital may flee when given the chance. When Beijing was facing significant outflows seven years ago, the government imposed controls to prevent capital flight. It has yet to lift them.
He points to several signatures of China's stagnation as a financial market power,
Since 2015, the renminbi share of payments through the Swift network for international bank transactions has fallen by a fifth, from an already negligible level under 3 per cent. A widely followed index that ranks 165 nations by capital account openness puts China at 106th, tied with tiny states like Madagascar and Moldova. While Chinese investors are restricted from investing abroad, foreigners are scared away from China by erratic government attempts to control the market. That helps explain why unlike in other nations, stocks in China do not rise and fall with economic growth. Economist Jonathan Anderson recently wrote that, considering its volatile prices and the vastness of its money supply relative to its markets, China is less comparable to emerging markets such as Brazil and Thailand than to frontier markets like Kazakhstan or Nigeria — and “should not be part of a standard EM portfolio.” Often it is not. Foreigners own about 5 per cent of stocks in China, versus 25 to 30 per cent in other emerging markets, and about 3 per cent of bonds in China, compared to around 20 per cent in other developing nations. Global doubt about China’s markets limits the renminbi’s appeal. Today, over half of all countries use the dollar as their anchor, a soft peg to manage their currencies. None use the renminbi. About 90 per cent of foreign exchange transactions involve the US dollar, while only 5 per cent use renminbi.
2. Brexit appears to have had a serious negative impact on UK economy,
The Office for Budget Responsibility, the official British forecaster, has seen no reason to change its prediction, first made in March 2020, that Brexit would ultimately reduce productivity and UK gross domestic product by 4 per cent compared with a world where the country remained inside the EU. It says that a little over half of that damage has yet to occur... By June 2018, a team of academic economists at the Centre for Economic Policy Research calculated that there had been a Brexit inflation effect, raising consumer prices by 2.9 per cent, with no corresponding increase in wages... While the UK was still in the EU and during the Brexit “transition phase”, there were no significant effects on trade flows. But this has changed since stricter border controls were introduced at the start of 2021, imposing no tariffs, but significant checks and controls at the formerly frictionless border... Red tape caused a “steep decline” in the number of trading relationships after January 2021, according to a study by the Centre for Economic Performance at the London School of Economics. The number of buyer-seller relationships fell by almost one-third, it found... “Brexit increased average food prices by about 6 per cent over 2020 and 2021,” according to the research.
3. Business concentration in the financial markets, asset management industry edition
At the end of 2021, Vanguard, BlackRock and State Street, the three biggest index fund providers, together control on average 18.7 per cent of S&P 500 companies, according to Lazard. Their ownership of smaller companies is even more concentrated. By the end of last year, they held 22.8 per cent of shares in the midsized S&P 400 index, and 28.2 per cent of the small-company S&P 600 benchmark.
4. Power sector reforms is like the whack a mole problem. Sample the outcome from the latest effort,
According to the recommendations of the 15th Finance Commission, the Centre has provided more fiscal room for states to borrow from the markets. The condition is the money has to be spent on power reforms. The leeway is for an additional borrowing space of 0.5 per cent of their Gross State Domestic Product (GSDP) over and above the 3.5 per cent limit. In FY22 states raised Rs 282 billion under this head. But in the name of reforms all that money is going towards expenditure meant to square off the past debt liabilities of the distribution companies. Net of those debts, no fresh money has been spent as capital expenditure to beef up capacity in the energy sector. Yet there is a demand to spend money to improve the quality of the distribution networks, including provision of metering capacity, or installing sub stations for renewable energy to feed into the grids. The states have also not taken any steps to rationalise power tariffs.
5. In the context of India's public recruitment drive,
Between 2003 and 2020, the central government staff strength has shrunk. In March 2003, there were 3.57 million employees. By March 2012, this fell to 3.15 million, before inching up to 3.18 million in 2020... The staff count in March 2020 was 11% below the staff count of March 2003. However, during this period, both the government’s wage bill and pension payout have grown at a compounded annual rate of 16%. That’s roughly doubling every four-and-a-half years. The share of these two heads in the government’s total expenditure is projected to increase from 7.1% in 2003-04 to 12.1% in 2022-23.
The two big central government hirings were in 2003 and 2013, both before the election year, same as now.
And the importance of trade to the fortunes of many countries, including developed countries.
World trade growth outstripped output growth over the past two decades.
8. Finally, fascinating set of maps identifying the culinary specialities of various regions/states of India. This being mango season, the mango map
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