China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

Brazil in big corona troubles – next year’s presidential election the only hope?

May 6, 2021

Brazil’s political, economic and social developments remain a mass. Currently, there is almost no light on the horizon.

The social misery (apart from the – since many years back – well-known problems): Covid-19 is a nightmare for this giant country, causing mountains of pain and sorrow. Officially, Brazilian infection (incidence) numbers are currently in relative terms even lower than in Sweden – but most probably much higher than reported (officially 15 million infections which is 7 % of the whole population and more than 400 000 deaths; 7 % is also the share for  the fully vaccinated people https://www.worldometers.info/coronavirus/).

The political misery: Jair Bolsonaro’s presidency has been widely failing, probably also to a high extent in the eyes of his conservative supporters from the presidential election in 2018. Is does not either seem probably that the Brazilian corporate sector can be happy so far with Bolsonaro’s efforts and results. His empathy for the terrible covid-19 disease must be regarded as completely insufficient – despite the fact that he personally was infected as well.

Consequently, many Brazilians see their hope for a better future in a promising change of president in October 2022, hopefully beyond the acute covid-19-crisis. What Brazil primarily needs are major improvements of institutions and education, now and in the longer run.

Can former union leader and Brazilian president Luiz Inácio Lula da Silva (2003-2011) really be able to run for presidency in 2022 year’s elections? He may be eligible again after the Brazilian Supreme Court justice had turned down severe corruption charges against him. Anyway, during his time as a president, Lula achieved some progress in education and socially – but to what extent can he leave the previous accusations of corruption behind?

The economic misery: Looking at the current economic situation, does not make things better. There is no preliminary result for GDP in Q1 yet – but survey results for PMI indices have come down more recently. Furthermore, interest rates have been hiked in 2021, and unemployment has been climbing up. Brazil’s hope for an economic recovery is certainly related to visible progress in the fight against corona – but in the short run possibly even more to a global economic recovery and to better conditions for Brazilians exports already in the forthcoming quarters.

In the meanwhile, we also should hope for relief in the terrible Indian pandemic!

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Help to India – much more is needed!

April 27, 2021

Just after having concluded my recent article about India’s covid-19 (B1.617) crisis, the first countries announced that they would send oxygen and other desperately needed equipment to India as soon as possible – among them the United States, the UK, Germany, France and even Pakistan.

Concerning Sweden, I read two days ago a message from the government agency MSB (Swedish Civil Contingencies Agency) that the volume of Swedish help to India ultimately depends on the situation and how much support is given by other countries. In my view, this comment is a terrifying mix of ignorance and/or cynicism. In the meanwhile, 120 respirators were promised to India which, however, does not look very generous. More should be donated by Sweden. What about oxygen generators and other stuff?

Unfortunately, too many decisions-makers outside India still do not understand the gigantic dimensions of India. Sure, each aircraft landing in India with badly needed equipment is a good deed. A good deed is also that the EU commences now putting together a common strategy and common action. Hopefully, much more is to come.

Summary – understand the size of India!

I am still missing more convincing and wholehearted efforts from the international arena. Sure, we have to welcome that the Indian tragedy has been recognized more globally. However, the following three important matters of fact should be paid attention to more clearly:

¤  India is an incredible giant country with enormous further domestic contagion risks;

¤  enormous domestic contagion risks also mean enormous global contagion risks;

¤  reflecting on the two risks mentioned above means obviously – together with the current dramatic situation – that India needs much more equipment from abroad for fighting against B 1.617 than currently on the cards. Right away!

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Handle comments on Chinese GDP growth carefully – exemplified by Q1

April 22, 2021

The National Bureau of Statistics (NBS) in Beijing published a couple of days ago the preliminary numbers for GDP growth during the first quarter 2021. An increase of 18.3 % was noted year on year (yoy) – highly appreciated by many commentators also in our part of the world. Sure, a number of them pointed also at the weak GDP development in the same period last year due to the corona shutdown. Consequently, the numerically strong GDP rise yoy in Q1 could be expected. But is the published number really reflecting very strong growth?

Modest growth in Q1compared to Q4

Despite frequently still existing – historically caused – doubts about transparency and quality of Chinese GDP statistics it should not be questioned that China had a remarkable recovery in the second half of 2020. However, there is a catch: Compared to Q4 last year, recent official GDP growth for Q1 looks much more modest (+0.6% qoq). We even can observe a slowdown compared to previous quarterly changes.

Chinese official statistics show the following numbers according to NBS:

GDP changes yoy

GDP changes qoq (%)
Q 1  2021

18.3

0.6
Q 4  2020

6.5

3.2
Q 3  2020

4.9

3.1
Q 2  2020

3.2

10.1
Q 1  2020

-6.8

-9.3
Q 4  2019

5.8

1.6
Q 3  2019

5.9

1.3

Re-newed acceleration in the cards – growth goals will be met

I have not found any illuminating comments on the GDP development of the first quarter this year. Sure, there were the new-year celebrations with production shortfalls. We also noticed softer PMI subindicators for March (new orders, production). But what else can be added? More transparency would have been nice.

However, it cannot be ruled out that some strengthening growth took place already at the end of Q1. Re-newed statistical acceleration of GDP growth will probably start in Q2, due to improving international demand in the first place. Altogether, China will most probably continue to be on track to meet the official objective of “more than 6 percent GDP growth”. 7-8 % seem to be achievable in 2021.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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