The Economic Survey for 2011-2013 has concluded that, as far as India goes, “A trade deficit of more than eight per cent of GDP and CAD of more than three per cent is a sign of growing imbalance in the country’s balance of payments. There is scope therefore to discourage unproductive imports like gold and consumer goods to restore balance.” It appears that the “love gold” trade is not exactly that, when it comes to the attitudes of India’s economic stewards. Perhaps quite the opposite. Something to keep in mind as we go forward. Indian offtake has been a widely reliable and quite significant contributor to the rise in gold prices in recent years.
While on the topic of Asia, let’s take a quick look at the latest developments in China. With one year left in office, Premier Wen Jiabao told reporters in a lengthy press conference this week that his country must adopt the idea of political reform and succeed at it, lest China is prepared to possibly “losing what we’ve achieved.” Those comments were squarely aimed at Communist Party factions that do not share his views on reform and openness in Chinese society. Mr. Wen is also known for not wanting to loosen controls on soaring property prices, and for closer trade and investment ties with the USA.
On the other hand, Mr. Wen’s valuable advice might be coming perhaps a bit too late to avert that which JP Morgan Chase & Co. has now called a “hard landing in progress” in China’s economy. JP Morgan’s chief Asian and emerging market strategist, Adrian Mowat, stated that “If you look at the Chinese data, you should stop debating about a hard landing. China is in a hard landing. Car sales are down, cement production is down, steel production is down, and construction stocks are down. It’s not a debate anymore, it’s a fact.”
Like Mr. Thangaval above, Mr. Mowat does have some CV credentials and professional achievement weight to add to his observations. He was the runner-up in Asian equity strategy for 2011 according to Institutional Investor. At this point, much as is the case in the gold market, the camps that assert a hard landing in China versus the ones which continue to see China as sailing right along and remaining an insatiable consumer of commodities are becoming more sharply divided and dug-in, with each passing day.
Until Monday, we’re staying in the “camp” that simply wishes you a very pleasant weekend….