Manoj Ambat's Blog dealing with Defence, Foreign Affairs, Strategic Affairs and Politics

Image credits- Wikimedia Commons Source- The National Interest Author- Ted Galen carpenter  Global attention has focused on the plunge in the Shanghai stock market and mounting evidence that China’s economic growth is slowing dramatically. Moreover, the contagion appears to be spreading, characterized by extreme volatility and alarming declines in America’s own equity markets. Those worries are compounded because there always have been doubts about the accuracy of Beijing’s official economic statistics.  Even before the current downturn, some outside experts believed that Chinese officials padded the results, making the country’s performance appear stronger than it actually was. If China is now teetering on the brink of recession, the political incentives for officials to conceal the extent of the damage would be quite powerful. The focus on the possible wider economic consequences of a severe Chinese economic slowdown is understandable, since the ramifications could

Image credits- Wikimedia Commons Source- The National Interest Author- Julian Snelder There's a rule in economics called Goodhart's law: when a measure becomes a target, it ceases to be a useful measure. If a government chases a particular economic variable, then it becomes influenced by policy, and so loses its meaningfulness as an input. 'Information value' is lost in the interference. Because managing economies is hard and good information is scarce, that's a big problem. The last few tumultuous weeks of action in Chinese financial markets shows Beijing struggling with Goodhart's law.  First, state institutions are actively supporting equities, reportedly on Chairman Xi’s personal order to push prices up. Second, after long controlling the exchange rate, policy-makers briefly let it go, only to rush back in days later to fix it again. These panicked interventions have cost Beijing dearly in both money and credibility and jeopardies its e

Chinese Finance Minister Lou Jiwei ( Credits- Internet image) Source- The National Interest Author- Minxin Pei Not too long ago, the Chinese economy appeared to defy both gravity and doomsayers. Despite years of unbalanced growth, Beijing has managed to rely on investment to power its economy and keep growth high. The country’s binge on credit since 2009, which has brought the debt-to-GDP ratio close to 300 percent, a perilous level for an upper-middle income country, has not triggered a financial crisis. Its real estate bubble, perhaps the largest the world has ever seen in terms of completed but unoccupied residential housing, is leaking air but has yet to crash totally. It was this appearance of economic invincibility that has emboldened the Chinese government to embark on an ambitious but highly-risky new foreign policy in the last few years. Many Chinese elites saw the United States and the rest of the West as in inexorable decline and China’s rise unstoppable. H

Shanghai Stock exchange  ( Source- Wikimedia Commons / Author-  螺钉 Source- The Diplomat Author- Eric Tegler Almost immediately after the Chinese National Bureau of Statistics released its second quarter GDP growth estimate of 7 percent in mid-July, a group of China watchers were crying foul. China officially targeted full-year growth of around 7 percent in 2015, a number matched exactly by its reported GDP figures for the first half of the year. Last week, Forbes ran a piece by hedge fund manager Jay Somaney, who argued that China’s growth is significantly lower. Somaney cited as evidence data points from the precipitous drop in the Chinese stock market and an 8.3 percent drop in exports to a glut in the country’s real estate market and the devaluation of the renminbi (RMB) by Chinese monetary authorities. Ivan Glasenberg, CEO of the commodity trading and mining firm, Glencore, speculated that China’s crackdown on corruption has stalled infrastructure projects, slow

Singapore Keppel Terminal ( Source- Wikimedia Commons / Credits- Calvin Teo) Source- The Diplomat Author- Anthony Fensom China’s slowdown may have rattled markets, but Asia is still expected to remain the world’s economic growth engine through the end of the decade, according to the Economist Intelligence Unit (EIU). In a July 29 presentation, Duncan-Innes Ker, EIU regional editor for Asia, said Asia stood out as the only economic region recording fast rates of growth, in stark contrast to the Eurozone’s woes, conflicts in Ukraine and the Middle East and stagnation in much of Latin America. According to the EIU, South Asia is expected to lead the pack with an average of around 7 percent annual gross domestic product (GDP) growth through to 2019, followed by China (over 6 percent) and ASEAN at 5 percent. In contrast, Latin America is forecast to post around 2.5 percent GDP growth, slightly ahead of the United States at over 2 percent and exceeding the Eurozone’s 1.

Minar at Kashgar city ( Source- Wikimedia Commons / Author- Hynek Miravec) Source- The National Interest Author- Robert D. Kaplan THE THOUSANDS of terra-cotta warriors from the third-century-BC Qin Dynasty, first unearthed in the mid-1970s, constitute one of the wonders of the world. I stared down into the vast clay pit where these life-sized soldiers, no two of them exactly alike, stand in a state of freeze-frame marching. They are all headed east. For Qin, though in the heart of today’s China, had been the westernmost of the Warring States. Thus, to the east lay all of Qin’s enemies. Beyond Qin, in the opposite direction westward, the agricultural cradle that has always defined Chinese civilization begins to give way to the emptier deserts of Central Asia. A short drive from the site of the terra-cotta warriors in Shaanxi Province brought me to the Great Mosque of Xian, an eclectic confection of Arabic script underneath a traditional, upturned Chinese roof decorated

Source- Wikimedia Commons / Author- JesseW900 Source- The National Interest Author- Gordon G. Chang On Friday, the People’s Bank of China (PBOC), the Chinese central bank, reversed course and set the renminbi on an upward path. That followed three straight days of devaluation that shook global stock, currency, and commodity markets, sending them downward. Friday’s reversal looks responsible. Nonetheless, the PBOC’s actions last week show policy disarray in the Chinese capital. The net result is that Beijing rattled the world, ruined its reputation for stable management, and did almost nothing to help China’s faltering economy. The daily devaluations follow months of government statements that the central bank would keep the currency stable. Every trading morning, 15 minutes before the 9:30 opening bell, central bank officials announce the day’s reference rate against the U.S. dollar. The renminbi, informally known as the yuan, is then allowed to rise or fall 2