View From The States

Apologies to MTD readers for my silence over the past week. I’m in the U.S. now until April 21, following up on the many positive responses we have received to the formation of JFP Holdings, and there has simply been no time to write. What I’m finding, though, is that interest in China is as high as I have seen it in the 20 or so years that I have been involved with the country.

My time here began last Saturday with a trip to New Haven where I gave a keynote address to the “Asia Tomorrow” conference at Yale University. The conference was the first of its kind held at Yale and was organized by a team of students, led by James Zhang and Vivek Raman, with an interest in Asia.

James, Vivek and their team did a fantastic job of organizing the one-day event that featured speeches and presentations by, among others:

  • Her Excellency Chan Heng Chee, Singapore’s Ambassador to the U.S.;
  • John Haley, Chairman, CEO and President of Watson Wyatt Worldwide;
  • Tom Barry, CEO and Founder of Zephyr Management;
  • Bill McCahill, Vice Chairman of JL McGregor & Company and former Charge d’Affaires of the U.S. Embassy in Beijing;
  • Alice Young, Partner and Chair of the Asia Pacific Group of Kaye Scholer, LLP; and
  • Dr. Zhiwu Chen, Yale Professor of Finance.

The fact that Yale undergraduates sat in a windowless lecture hall on a sunny spring day in New Haven is testimony to the strong interest in Asia on the part of our next generation of government and business leaders. Congratulations on a successful conference to James, Vivek and the Asia Tomorrow team!

A common theme in the numerous meetings that I have had over the past week is a strong interest in what is happening in China. With most corporate executives and investment professionals expecting a slow, drawn-out recovery in the United States, they were generally surprised to hear that China is already seeing the first signs of an improving economy. Except for an occasional reference to China’s recovering economy on shows like CNBC’s Squawk Box, news of renewed economic life in China is not widespread.

All the indicators are turning green, however. The Shanghai Index is up 33 percent so far this year, and is trading 42 percent higher than on November 4, its low point in 2008.

China’s official purchasing manager’s index (PMI), a measure of activity in the manufacturing sector, rose to 52.4 in March from 49.0 in February, marking the first time the index has been in expansionary territory since September. (A reading above 50 indicates expansion.) Non-manufacturing PMI in the construction and services sector, which accounts for 30 percent of China’s GDP, rose to 55.7 from 41.9 in February.

Even car sales are up. Preliminary reports indicate that sales in March for the top 25 assemblers in China were up by 1.7 percent compared to last year. Sales for the first two months of 2009 were flat. Granted, it’s not the 20 percent growth that China’s automakers had grown accustomed to, but compared to 30 to 40 percent declines seen in other parts of the world, it’s a step in the right direction.

With these positive indicators, an increasing number of economists and officials are now arguing that the worst time may be over for China’s economy.

“The continuous increase in PMI, along with positive signs I can witness from different places, showed that the Chinese economy may have started to warm up,” Ma Jiantang, the head of China’s National Bureau of Statistics, told China Information Daily.

“This move implies China’s economy has returned to an expansion track after five consecutive months of contraction since last October,” Morgan Stanley economists Steven Zhang and Qing Wang said in a note to clients.

Andy Rothman, China Macro Strategist for CLSA Asia-Pacific Markets, said:

Results of the two official PMIs support our view that the government’s three stimulus programs (1. removing the brakes to growth applied when Beijing was worried about overheating; 2. flooding the economy with credit and liquidity; and 3. massive infrastructure spending) have begun to gain traction and the Chinese economy is on track for significant acceleration in the second half of the year.

With China now leading the rest of the world out of the economic crisis, the next question is how to benefit from what is happening in the world’s third largest economy. More on that later.

One Response to “View From The States”

  1. Hi Jack — just a small design suggestion, if you’ll kindly excuse me — since I’m catching up on all of your posts going back some month…if the date of the post can be inserted atop the post other than in the URL, then I know what “month” I’m in at a glance.

    Has anyone else mentioned it?

    From Prague,
    ADM