We always look forward to reading Jim O’Neill’s weekly Viewpoints note.
This week’s note was particularly interesting.
O’Neill, Chairman of Goldman Sachs Asset Management, shared details of an uncomfortable encounter with an unnamed Chinese politician.
From his latest Viewpoints:
As interesting as that last meeting was, it pales into irrelevance compared with one of the oddest meetings I have ever attended earlier last week. I cant really reveal all the details, but I had been asked to attend a small group meeting with an important policymaker from China. I sort of expected it to be rather formal, and full of pleasantries, which it was. But it was way more than that. After answering in impressive detail and style a number of questions about the economy and investing, the policymaker then spent a considerable amount of time suggesting that other countries should be careful about lecturing China how to run itself in all fields, especially those of human rights, given others own historic track records. It was quite remarkable, and I am still not entirely sure what to make of it.
After getting that out of the way, O’Neill got down to business and talked about last week’s disappointing Chinese Q1 GDP report.
Anyhow, this meeting conveniently followed the recent release of Q1 GDP and much other data, and also preceded the quite important official change in the IMF forecasts of future Chinese BOP current account surpluses, which I mentioned briefly last week. As this past week advanced, I noticed some more sell-side China analysts picking up on what I had seen last weekend. Within the softer-than-expected 8.1 pct year-on-year GDP rise, policymakers said that more than 75 pct of this had come from consumption. This implies that consumption is already a notably rising share of GDP. When I reflect back on this part of the meeting I attended with the policymaker, I think China is already further down the path of adjustment than many external observers realise. I am glad to see that this doesnt appear to include Christine Lagarde (and Tim Geithner) following their quite positive comments on China this week. If evidence continues to be released to support this soft landing, then certainly Chinese equity markets would be delighted, and it should be a pretty good source of support for the rest of the worlds markets too.
We’re glad to here things ended on a positive note.
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