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CHINA: "Overcapacity: A Potential ‘Speed Bump’ in the World’s Largest Automotive Market " report

CHINA: "Overcapacity: A Potential ‘Speed Bump’ in the World’s Largest Automotive Market " report. 16-page report by KPMG.

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back to index backCHINAtalk November,  2016


China's New Silk Road Could Re-Ignite Global Economic Growth

Summary

Current global economic activity is driven by three main economic poles. Interaction with these poles is mainly facilitated by geographical proximity to them, or proximity to coastal areas.

China's new silk road is meant to open up some of the more landlocked parts of Eurasia which are also geographically removed from economic poles to trade.

The opening up of new global economic frontiers will be a welcome development given the otherwise struggling global economy. It could salvage and re-start global growth.

Those who have been following my work on SA know that I am not generally very optimistic about the future of the global economy going forward. In fact, I have been warning for the past few years that we are likely headed for an economic calamity. My most recent series of articles on macro issues focused on the fact that US and Western economic stability and continued growth since the 1980's was mainly supported by a steady policy of declining interest rates meant to make up for stagnated wages, which has now reached the end of the road. I have also been focusing on the problems facing Europe lately. I do believe that the EU will break up within a decade or so, with significant consequences for the global economy.

At the same time, there is this whole other aspect to global economic trends, which centers around China's increasing role in the Eurasian sphere. The new silk road seeks to open up new areas of economic activity, which have been neglected by historical processes. In order to understand what this is all about and why it is important, I want to give some quick historical perspective in regards to the evolution of economic poles over the past five hundred years, which still govern economic activity today.

The European pole.

Shortly after the 1492 discovery of the Americas, Spain ventured into the new world and managed to bring back great hauls of gold and silver. It was not Spain however which ended up capitalizing on this influx of wealth, but countries such as Netherlands and England, which were better suited to providing goods which Spain's precious metals inflow could buy. In effect, Spanish money served to jump-start North European manufacturing. Northern Europe got a further boost from the start of the colonial period, which meant that their goods could be exported far beyond Europe, to customers who were more or less forced to take these goods. Thus, the European economic pole emerged, and it is still in place today.

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Source: Seeking Alpha - GAI






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