Stocks rallied around the world earlier after the People’s Bank of China pledged on June 19 to make the yuan more flexible, while ruling out a one-time revaluation of the currency that’s been held at about 6.83 yuan per dollar since mid-2008. The global economy is “gradually recovering and the upturn in the Chinese economy has become more solid,” it said in a statement announcing the action
This quote from a Bloomberg article comes as welcome news to many financial markets as the flexible adjustment of China’s yuan did exactly what economists had expected it to. While stimulating other countries, the greatest effect of the yuan changes will be felt in China where it will help prevent dependence on exports and damaging asset bubbles from forming.
Israel’s economy is one of the “happy stories” in the world today and the country isn’t in need of fiscal stimulus, Nobel Prize-winning economist Paul Krugman said.
Israel was one of the small number of advanced countries, such as Canada and Australia, that were able to weather the crisis well, Krugman said today at an economic conference in Tel Aviv. Part of Israel’s success was due to a “boring” banking system, which wasn’t engaged in any “wild stuff,” he said.
This quote, from a Bloomberg article, offers one possible explanation as to why some countries remained relatively stable during the financial crisis while others were affected more severely. Because of this, economists like Krugman say that the nation is not in need of government stimulus for its financial market.
Despite fears lingering from the recent economic difficulties, high net worth investors are regaining wealth at a solid clip. MarketWatch.com explains:
“The last few years have been significant for wealthy investors. While in 2008 global HNWI wealth showed an unprecedented decline, a year later we are already seeing distinct signs of recovery, and in some areas a complete return to 2007 levels of wealth and growth,” said Sallie Krawcheck, president, Global Wealth and Investment Management, Bank of America.
“The rebound has been, and will continue to be, driven by emerging markets — especially India and China, as well as Brazil,” said Bertrand Lavayssiere, managing director, Global Financial Services, Capgemini. “In fact, Asia-Pacific was the only region in which both macroeconomic and market drivers of wealth expanded significantly in 2009.”
With investment opportunities from large to small, emerging financial markets continue to present opportunity to not only the already wealthy, but also those looking to improve their financial outlooks.
Flexible exchange rates are being used by many countries to sucessfuly control the rebound in their economies. In China, the shift toward a stronger exchange rate for the yuan may affect more than just their own economy, as this quote from BusinessWeek.com explains:
While U.S. consumers will pay more as a result of the rise of the yuan, the move is a net plus for the world economy because it lessens the risk of a hard landing in China and a protectionist backlash in the U.S., said Mark Zandi, chief economist at Moody’s Analytics Inc. China has been trying to prevent overheating of its economy after first-quarter economic growth of 11.9 percent.
“It’s a very positive development,” said Zandi, who is based in West Chester, Pennsylvania. “It will make it easier for the Chinese to control their economy. It will keep global protectionist barriers down.”
The longer-term benefit to the world economy may be to make it less susceptible to a cycle of boom and bust by shifting away from its reliance on U.S. spending, which in turn is financed by Asian savings, said Torsten Slok, an economist at Deutsche Bank AG. A U.S. savings rate of 3.6 percent in April is about a 10th of China’s, the highest among major economies.
Although consumers will surely grumble, a short term rise in retail pricing for the U.S. seems a small cost for enhanced stability for financial markets the world over.
The world economy is still climbing back up, and as it does officials are being careful to not repeat the same mistakes that started the tumble down. Here is one example, from the Winnipeg Free Press:
The Bank of Canada says world leaders can’t afford to be complacent about risks that remain in the global financial system.
Deputy governor Timothy Lane told a Winnipeg audience that Canada’s recovery has progressed more rapidly than expected, but financial stability still faces risks from outside forces.
Those risks include sovereign debt and global economic imbalances.
With G20 discussions beginning this week, there will likely be more concrete, and hopefully positive, information available shortly about the future of the global financial scene.
As the above video explains, China’s economy is in the midst of a rapid rise. With its immense strength and value, the Chinese financial market is already one of the most powerful in the world and could very well be the largest in the near future.
The IMF yesterday said the global economy will expand 4.2 percent in 2010, the fastest pace since 2007, compared with a January forecast of 3.9 percent. Emerging nations including China and India are leading the world out of its worst recession since World War II, with Europe and Japan trailing the U.S. among advanced economies, the fund said in its World Economic Outlook.
This quote from a BusinessWeek article contains the latest forecast from the International Monetary Fund. Their prediction appears to fall in line with those from other sources which have all stated that the global economy will continue to improve over the coming year led by new financial growth and investment opportunities in emerging nations.
Following the trend of continued growth in financial markets around the world, factors indicate that Spain’s economy is rising out of its recent recession. The Financial Times reports on the circumstances contributing to this improved performance:
The central bank attributed the gradual improvement in the Spanish economy to the recovery of the world economy, better export performance, continued fiscal stimulus by the government and higher levels of confidence.
Driven by emerging investment opportunities and government stimulus programs, Spain joins the growing list of countries whose are issuing optimistic forecasts regarding their financial futures
With India’s economy now outperforming many, other countries are beginning to look at the way they do business for ideas they can bring to their own operations. In this quote from an MSPmentor article, Joe Panattieri takes a look how spending patterns within India’s banking and financial services may change how other countries handle work:
At first glance, the latest research about India’s managed services market growth is hardly surprising. Springboard Research claims spending on IT managed services in India will top US$3.8 billion in 2013, up from US$1.6 billion in 2009. That’s an impressive 22.9 percent compound annual growth rate. But the report’s really interesting twist involves the banking vertical.
In terms of adoption among verticals, the report found:
“Banking, Financial Services and Insurance (BFSI) organizations remain the largest contributors to the managed IT services market with a share of 28.2 percent, followed by the Manufacturing and Government verticals.”
I wonder: Is the situation similar in the U.S.? Generally speaking I doubt it. But perhaps I’m wrong. U.S.-based MSPs such as HEIT have successfully targeted the banking and financial services verticals. And Springboard Research also points out a clear distinction between (A) IT managed services vs. (B) strategic outsourcing engagements.
Capitalizing on the way work is contracted and outsourced has played a major part of the rise in India’s economy. By taking advantage of lowers costs to do work from home and for those abroad, the country has created a major business niche.
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