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China – Newest Global Growth Engine?
By Shlomo Maital
source: Bloomberg
Once, when the world economy was in trouble, there was a locomotive to pull it out of stagnation – the US economy. After World War II, when the rest of the world was destroyed, the US supplied purchasing power through its imports. With frequent global recessions, again the US appetite for consumer goods supplied badly-needed demand for the world.
Today? With an incompetent xenophobic addled President (at least for the next 13 days, or 92 days until the Inauguration), and the pandemic worsening in the US in up to two-thirds of all states — the United States is not the locomotive but in fact the quicksand.
Enter China, vilified by Trump, but arguably emerging fastest and strongest from the pandemic. China’s quarterly GDP growth rate annualized, is nearly 5%…. and that means demand for imports, especially from the Asian ecosystem at which China is at the center. China can be at least a regional locomotive, and the effects will spread more widely.
Why has China’s economy done a “V-shaped” recovery, when the US recovery, and that of the EU, are far more likely to be flat-bottomed U-shaped?
China’s local authorities have poured easy credit and infrastructure projects into the economy; lockdown has virtually ended, and when the virus rears its head, China rapidly tests millions of people, to gain control.
It is possible to admire China’s economic resilience, while fiercely criticizing its flawed civil rights. Why cannot every nation learn from other nations, embracing the good, rejecting the bad?
Bloomberg News shows regularly how the US economy is lagging – and the conclusion is, you cannot jumpstart an economy without gaining nearly-full control of the virus. The failed US administration – not just the President, but the incompetent Cabinet and advisors he has appointed, including Dr. Atlas, who espouses ‘herd immunity’ and denigrates masks — will go down in history as one that outdid Calvin Coolidge (1928-32) in failing to see what was clearly written on the wall.
How Chinese Kids Return to School
By Shlomo Maital
US President Donald J. Trump wants American schools to open – now! He rejects the CDC guidelines to schools as expensive and burdensome. (For once, CDC refused to rewrite them, as he ordered). He offers no aid to schools, already facing huge deficits, for the costs of safely opening.
It is unthinkable for the US to learn from other countries – how can the greatest nation in the world learn anything from, say, Canada, Finland, Taiwan, Singapore, and, heaven forbid, China?! But in the unlikely event anyone in the US is listening – here is how the Chinese re-open their schools: * And keep in mind: China’s GDP per capita is $10,000, one-sixth that of the US ($62,000).
https://m.facebook.com/story.php?story_fbid=3654737014543735&id=1381450335205759
- Children enter the school one by one. Their hands are disinfected; their bodies; and the soles of their shoes.
- They have partitions between each desk. They practice social distancing.
- And they wear masks. Including small children.
- They disinfect again when they leave school – completely. Let’s face it. China is a rule-making society. Long before the Communist Party, China’s culture focused on ‘the greater good’ — collective responsibility. My friends in Asia simply cannot understand why Americans rebel against wearing masks, as an invasion of freedom. Schools should be re-opened. Kids need the social contact, more even than the knowledge. But it has to be done right. Israel did it – wrong. And we are now third in the world for new cases (as % of population).
- There is a simple point to be understood. You cannot save jobs, save the economy, restart the economy, while the novel coronavirus is raging. This will kill people. You have to support those who have lost all their income, restart very very cautiously, phase by phase, and first largely conquer the virus before you declare the economy open. IF you don’t, you get a second, third, fourth wave… and if we have a new wave on top of the Fall flu, which in Israel floods hospitals and puts people on beds in corridors – the bad news we have today will seem like a picnic in September. If you open schools stupidly, you will pay a very heavy price. We in Israel already are.
- America is a rule-breaking society. Proof? The gun laws, which allow automatic weapons. This has proved to be literally fatal, during the pandemic, when one rule-breaker can be a super-spreader. And basically, the POTUS, President of the United States, is metaphorically a super-spreader, denigrating masks, and spreading false optimism. Burdensome? Impractical? What in the world is so difficult, about making many thousands of plexiglass partitions, between school desks? Burger chain Shake Shack got $10 million in US emergency aid – the furor that resulted made them give it back, because, they did not need it in the least. Why can’t schools get the same deal that Shake Shack gets?
The Pandemic is NOT Over
By Shlomo Maital
The Pandemic is NOT over. We are getting farther away from conquering it, not closer. Here are two disturbing reports from Bloomberg News, a credible source:
First the United States:
“By most accounts, the U.S. has failed spectacularly at managing the coronavirus pandemic. American-made tests were first defective, then largely unavailable; misinformation about the virus was broadcast in politicized White House briefings; and lockdowns weren’t enforced quickly enough, all of which likely worsened the spread of a disease that’s already killed 120,000 Americans. Now, with restrictions lifted earlier than advised and infection rates predictably spiking, calamities suffered in the northeast and northwest are re-emerging inland. And come fall, it may get even worse. Federal officials led by Dr. Anthony Fauci warn that this year’s flu season could overburden the health care system. —David E. Rovella”
And the rest of the world:
“The number of new Covid-19 cases around the globe is accelerating, fueled by a surge in Latin America. Germany’s infection rate rose for a third day, lifted by local outbreaks, including one in a slaughterhouse. However, Beijing reported only nine new infections, a sign that a recent outbreak may be under control. Infections and deaths reported by Russian officials also flattened. The overall global surge, though, is putting a world economic recovery in greater jeopardy. “
And to make things worse: There is some evidence the novel coronavirus has mutated, and in some mutations has become more virulent and harder for the body to step.
I often hear the claim that the new cases are largely among the young, which are populating bars and restaurants and beaches, and that even though the number of infections rises, the number of deaths remains steady or declines. The danger is, as the coronavirus spreads among the young, it will mutate and become more dangerous. And we will not be prepared. Moreover, these mutations make it much harder to successfully develop a working vaccine.
Viral Shedding Peaks – BEFORE Symptoms!
By Shlomo Maital
The late Li Wenliang, China’s hero doctor who warned us
A very large number of research papers are now emerging from China, by Chinese scientists and scholars, related to biology, medicine, education, and other areas. China is sharing with the world what it has learned.
Yesterday’s Nature Medicine features a very important article by a large group of Chinese researchers, which shows this:
“We report temporal patterns of viral shedding in 94 patients with laboratory-confirmed COVID-19 and modeled COVID-19 infectiousness profiles from a separate sample of 77 infector–infectee transmission pairs.
We observed the highest viral load in throat swabs at the time of symptom onset, and inferred that infectiousness peaked on or before symptom onset. We estimated that 44% (95% confidence interval, 25–69%) of secondary cases were infected during the index cases’ pre-symptomatic stage, in settings with substantial household clustering, active case finding and quarantine outside the home. Disease control measures should be adjusted to account for probable substantial presymptomatic transmission.”
Meaning? Three rather scary words: substantial pre-symptomatic transmission. We spread the coronavirus even before we feel symptoms.
This is why social distancing will need to be enforced for quite some time, until tests are widely available and can provide results within hours. If you have no symptoms, then anybody can be a carrier and spreader. Anybody.
Finally, we are learning about this insidious enemy – is anyone expressing some gratitude to the Chinese for sharing?
Well, a small gesture – here are the names of the researchers who co-authored this paper: Xi He, Eric H. Y. Lau, Peng Wu, Xilong Deng, Jian Wang, Xinxin Hao, Yiu Chung Lau, Jessica Y. Wong, Yujuan Guan, Xinghua Tan, Xiaoneng Mo, Yanqing Chen, Baolin Liao, Weilie Chen, Fengyu Hu, Qing Zhang, Mingqiu Zhong, Yanrong Wu, Lingzhai Zhao, Fuchun Zhang, Benjamin J. Cowling, Fang Li & Gabriel M. Leung
European (Dis)Union: Shame on Them!
By Shlomo Maital
Italy is desperate. With more COVID-19 cases and deaths than China, it is now ‘triaging’ (selecting) those who get medical care and not treating those 60 years old and over. Don’t blame them – they have to, they lack medical equipment and doctors and hospital beds and ventilators.
Wait. Italy is part of the “European Union”, a union of 27 nations banding together to help one another and support one another.
Right?
Apparently, wrong. The nation coming to Italy’s rescue is not the other 26 EU nations, but Russia, which has sent medical supplies and personnel.
(And by the way, United States? Which used to help other nations? Not in the age of Trump… America First!)
Slovakia’s leader noted that his desperate requests for help from the EU were turned down cold. But China did come to the rescue, and it is China which is now sending medical aid to other nations. The press claims it is done to restore China’s image, badly damaged by the fact that COVID-19 originated in China. Maybe, too, it is done because China simply gets it.
European Union? It was not Brexit and Britain that has damaged European union, but the Europeans themselves. Whatever happens in this crisis, Europe will not be the same. If nations in a union do not help one another in time of need, then there is no union.
Shame on you, Europe. I can’t believe that none of the other 26 EU nations can spare any medical supplies or equipment, at all. Nor is there a single EU person in charge of EU overall policy.
It will be very hard for the Europeans to put Humpty together again, after pushing him off the wall and not even offering a bandage.
COVID-19: Lessons from Three Smart Small Asian Nations
Part 2. Hong Kong
By Shlomo Maital
Hong Kong is officially known as “the Hong Kong Special Administrative Region of the People’s Republic of China”. It has 7.4 million people and GDP per capita of some $46,000 – higher than that of Israel.
Here, according to the New York Times, is how Hong Kong dealt with the COVID-19 crisis, influenced strongly from its traumatic experience with SARS in 2003:
“ Hong Kong’s heavy death toll from SARS, nearly 300 people, has spurred residents in the semiautonomous Chinese territory to exercise vestigial muscles of disease prevention this time around, even as the local authorities initially dithered on whether to close the border with mainland China. Nearly everyone, it seemed, began squirting hand sanitizer. Malls and offices set up thermal scanners.”
“The most important thing is that Hong Kong people have deep memories of the SARS outbreak,” said Kwok Ka-ki, a lawmaker in Hong Kong who is also a doctor. “Every citizen did their part, including wearing masks and washing their hands and taking necessary precautions, such as avoiding crowded places and gatherings.”
“The Hong Kong government eventually caught up to the public’s caution. Borders were tightened. Civil servants were ordered to work from home, prompting more companies to follow suit. Schools were closed in January, until at least the end of April.”
“On Tuesday, the government of Hong Kong, where only 157 cases have been confirmed, announced a mandatory 14-day quarantine for all travelers from abroad beginning later this week.”
SARS outbreak occurred nearly 17 years ago, in 2003. Despite this, the memory of SARS and the measures adopted at that time are fresh in the minds of Hong Kong citizens. It was the people of Hong Kong who acted, even before the government and administrative officials took action, in the COVID-19 outbreak.
I am certain the same will be true of COVID-19. We will remain this for generations. And hopefully, in the next pandemic, we will act promptly, as Hong Kong did.
Births in China: Social U-Turns are Hard!
By Shlomo Maital
Social U-turns (radical changes in policy involving social behavior) are immensely difficult. Consider China’s one-child policy, now doubled to “two children are OK”. It’s not working too well.
China’s one-child policy aimed at lowering the growth rate of its rapidly growing population. The policy set a firm legal limit on the number of births parents could have, and was introduced in 1979. In the mid-1980’s it was changed to let rural parents have a second child if the first was a girl. The policy lasted three decades and was abandoned at the end of 2015.
A New York Times report by Sui-Lee Wee and Steven Lee Myers, from Beijing, now notes that China’s birth rate has fallen to the lowest rate in six decades, despite the rule change permitting two children. In 2019 only 14.6 million babies were born in China, in a population of 1.4 billion. That is a 1% birth rate – not sufficient to supply the labor China’s economy needs.
Why has China’s birth rate not increased since 2015? Here is the best explanation. “We are all only children,” said a young Chinese dental assistant, “and to be honest, a little selfish. How can I raise a child when I’m still a child myself? And take care of him and feed him at midnight?”
I have a strong suggestion for China’s leaders. Contact Dan Ariely at Duke U. and his group of researchers, along with Richard Thaler, George Lowenstein, Robert Shiller, and other leading US behavioral economics experts. Ask them to design a few small-sample experiments. The Chinese people are very very pragmatic. They do what is in their interest. How can having two children be shown to be in the interest of hard-working Chinese middle-class educated couples? I’m pretty sure the behaviorists will have some answers.
Notice how hard a social U-turn is, even in China, where authorities rule with a strong hand. If you believe America is going to change radically, even if Trump loses in November, please think again. Social change has strong momentum and by the laws of physics, Momentum equals mass times velocity. There is a large mass of Americans who think like Trump, and even if you slow their velocity the momentum is still immense.
World Economy: Heading South West (That’s Not Good)
By Shlomo Maital
I know I am repeating myself. I wrote about this just recently. But, the latest Ifo (Munich think tank) survey reveals this:
“In the first quarter of 2019, the economic climate indicator for the advanced economies has tumbled to its lowest value since the fourth quarter of 2012”
The graph above shows on the x axis, “assessment of the current economic situation” and on the y axis, “economic expectations” (how you think the economy will trend in the coming 6 months).
The worst outcome is: the ‘dot’ moves south west (i.e. the economy is declining, and it will continue to decline in the near future).
Ifo Munich gathers data on the world economy, by region, by a survey of experts.
Look closely at the graph –the “world economy” moves strongly south west. So do the Euro area and advanced economies. Same for Mideast and North Africa. Nowhere does any economy move other than west (down).
Why? How about – US -China trade war, global uncertainty, Brexit, EU disunity, and…. The list is long.
We can blame part of this on Trump. He has thrown a monkey wrench into the world trading system, introduced massive uncertainty….and the world economy has cooled. When the two largest economies in the world, US and China, AND Europe, all cool at once…. We are in trouble.
Fasten your seat belts. It will get worse before it gets better.
Global Slowdown – Beware!
By Shlomo Maital
I regularly participate in an economic survey run by a Munich-based research institute, that tracks how the world economy is doing. The latest results are not good.
The heat map shown above indicates whether economies are booming green or slowing yellow, orange, light red, dark red.
You can see at a glance looking at the ‘heat map’, that the US, Europe and emerging and developing economies in Asia are all slowing. Basically the whole world is slowing down, economically.
Why? The US is cooling, as businesses choose not to invest the tax windfall given by the Trump Administration but rather to buy back their shares. China is cooling, owing to the trade war with the US. Europe is cooling, owing to deep uncertainties about Britain, Italy, Hungary and other nations, and a growing spat between France and Italy.
In short – look for a global slowdown, that feeds on itself — US demand slows, hurts China, which hurts the Asian economic ecosystem..which in turns slows….
A good time to set aside some savings, for rainy days ahead.
Infrastructure: Europe, China – and America
By Shlomo Maital
In Economics, there are not many principles we can cite with absolute certainty. Here are two of them:
1. The rate of return on investment in Research and Development is in many cases astronomical. In 1958 Prof. Zvi Griliches found that investing in research in hybrid corn “paid a return of at least 700 per cent”. Few other social investments can rival this. Yet countries continue to underinvest in R&D.
2. The rate of return on investment in infrastructure (roads, transportation, communication, education) is equally astronomical. Yet in the West countries continue to undersave and underinvest in infrastructure.
The contrast between Europe, China – and the US under Trump is stark.
The EU, not noted for bold innovation, is undertaking a huge infrastructure project that will link Malmo, a Scandinavian port, with Palermo, a port in Italy. This project will help reduce the large gap between the wealthy Northern EU and the relatively poor Southern EU. It will do much to knit the fractured EU together, in the wake of Brexit.
China has a bold vastly expensive program to build a new Silk Road, linking China with Europe, the Mideast and Africa. The One Belt One Road initiative, now changed to “Belt and Road Initiative” is, according to Wikipedia “one of the largest infrastructure and investment mega-projects in history, covering more than 68 countries, equivalent to 65% of the world’s population and 40% of the global GDP as of 2017.”
And the US? Well, on a recent visit there, I used Waze (an application developed originally in Israel, now owned by Google) to navigate. In the US, Waze informs the driver of potholes. And, trust me – I heard about a LOT of potholes from Waze while driving in the eastern United states. Some of them were big enough to swallow Trump’s ego.
President Trump speaks often about infrastructure. He has plans to fix it, including thousands of crumbling bridges. But here’s the catch. The latest Trump tax cut put a huge hole in the government budget and added $1.5 trillion to the deficit. So there is no money left for infrastructure investment. The solution? Trump thinks he can get private industry to finance it, using tax credits.
This is science fiction. Basic economics shows, the return on infrastructure investment is largely “social”, that is, not captured by private investors, but accruing in a diffuse manner to all of us. So why would private money invest in it?
China, EU – and the US. Another instance of how the US has become a Third World nation, and China, in the Third World, is becoming First World.
TIMnovate 