The emerging world contains two sousmondes

What indicator particularly watch you these days

Patrick Artus. For us, the central point is the consumption of households. The recovery of consumption is dramatic since the summer 2009. Optimists believe that the recovery will last (because the credit will leave and employment adjustment is completed in the United States). The pessimists, like me, not believe any, believing that wage income are very low and that the credit will not leave.

Romain Boscher. I would answer the public action. The beginning of the year 2010 has this paradox present visibility almost zero, while it is ultimately quite marked, including by public action. What we have seen in the markets in recent weeks is the evidence. The stock market stall was caused by the recent remarks of the President Obama. The recovery of consumption, as has just said Patrick, was obtained by the public transfers. And the strength of China is explained by the public shares on China's banks. More ever, we are in public hands or parastatal (I think central banks, including the connivance with the States has never been as large).

Public action is made possible by the central banks, which were issued to zero rate and detonated their balance sheets. Everything is done for short rates are low and long rates remain as long as possible, and this despite the widening of budget deficits. For us, the ultimate anguish is postponed to the image of Dubai or the Greece... The day where the State itself will lose his credit.

Olivier Garnier. Public authorities are the key factor. In 2010, their action will be less and less a source of protection, and more and more a risk factor. Currently, the economy and asset prices depend usual rather than their basic policy. For example, on the American bond market, the biggest purchaser became the Fed, which is now a source of uncertainty. I tend to think that whatever they do, Governments or central bankers commit inevitably errors in the phase of output of the policies "of State of emergency". Their task is further complicated by the differences in conditions between countries occur during recovery. In particular, some emerging economies face a dilemma: either monetary policy remains aligned with that of the Fed, but this is likely to cause inflationary pressures. or disassembles in, but it may then be destabilizing capital, through inter alia the strategies of "carry trade".

Pierre-Olivier Beffy. We, we particularly follow exit strategies of central banks for the developed countries. Zero rate policy seems to us quite poorly understood by the markets. Even Mr. Bernanke, in its communication strategy, knows exactly how he will guide the officers and what message it will pass. For us, there is a source of uncertainty, even if for the moment communication of central banks is still very good.

It must when same property exist areas in the world where the growth is possible without public support!

Romain Boscher. This is the true debate, particularly focusing on the consistency of the Chinese figures, because they are those of concern to the most.

China or do all of the emerging world

Romain Boscher. The emerging world contains two "sous-mondes". There are States that were unable to resist their too close proximity from the countries of the G7 (as the Russia and the Mexico). Some are poorly identified of the crisis, others have are even not identified at all (such as the Baltic countries or the countries of the East). And then there are those who go well. But few use the remedies applied in the countries of the g-7 ten or fifteen years ago, when growth slowed. For memory, after the thirty Glorieuses, growth has boosted debt, which has been accumulated for thirty years, so she exploded there where she had been too raised. The countries that did not, such as China, addressed to the same remedies. China can still afford, because less than an excess of debt, it is rather a savings glut. But, in doing so, it recreates the roots of evil that we have known and aggravates imbalances. If China continues to issue 50 to 60 points of GDP debt by half, this including a problem of speculation on the assets, but not only (possible bad loans and losses). This country also doped growth with debt to fund local infrastructure.

Pierre-Olivier Beffy. 60 of final opportunities for goods produced in China go to the G3. The fact that China can now do a lot of debt is probably not sustainable or desired by the Chinese authorities. Especially since, to gain global market share, Chinese policy is rather oriented industry that household consumption. The share of consumption in GDP has consistently fall since 1980, despite the emergence of the middle class. The short term, the country has no interest to change its strategy: speed up the transfer of capital and technology from the developed countries. Throw paper on the market (to deflate its balance sheet as well) would be terrible for an economy that is in need of credit.

Patrick Artus. I am in total disagreement with what has been said. The figures tell us instead that 88 of China's GDP will to Chinese domestic demand. Exports imports content is huge. A recent study showed that 80 of the jobs created in China, for ten years, are jobs that produce goods for the Chinese domestic market. In reality, the weight of exports is not so big and it is a relatively closed economy. China is a global editing workshop. Its inhabitants are bringing products to assemble and then the highlight. For example, in electronics, 96 of the exports are for imports. It is an economy that depends almost entirely on its domestic market. Therefore, they are not very concerned about the aspect of the exports.

Furthermore, in China, the internal market is characterized by an excess of investment and consumption deficit. Each expense equipment, arises a problem of profitability which found its solution in a reduction in wages. The share of wages in GDP does not stop lower. The country is unable to break this vicious circle.

Romain Boscher. It is a deflationary pool at the global level.

Olivier Garnier. This trend would not necessarily be reversed if China was undergoing a revaluation of its currency. This could indeed push Chinese enterprises to lower wages to maintain their margins. This is seen in the Japan in previous decades: the appreciation of the yen had a deflationary effect on the domestic economy and is not translated by resorption of the external surplus. One cannot exclude that the same phenomenon occurs in China in appreciation of its currency.