Politics

“Made in China 2025”: China’s strategy for the future – a threat to the industrialised nations?

At least since US President Donald Trump declared punitive customs duties on Chinese imports to be a declaration of war against “Made in China 2025”, China’s project for the future has been widely talked about. The objective of the strategy is to fundamentally modernise China’s industry and to put it in a position to produce the high-tech products that the country has in the past had to import. In principle this is an important, indeed a long overdue, step in the right direction. This is because China’s previous growth model – cheap mass production of relatively simple industrial goods – has become outdated with demographic change and the country’s improved level of prosperity. “Made in China 2025” is based on the concept of “Industry 4.0”, the digitisation and networking of industrial production. It is planned that, by means of digitisation, ten selected key industries in China, including electromobility and robotics,…

Despite the G20 Summit, equities are now facing stronger headwinds

Despite the results of the recent G20 Summit, the pace of macroeconomic growth is definitely slowing. For some time, the problems were limited to emerging markets, but it is now becoming apparent that economic growth has also peaked in a number of developed countries. The trade dispute between the USA and China, patches of weakness in Brazil, Argentina and Turkey, to say nothing of the uncertainty surrounding Brexit and the budget standoff between Italy and the EU: these factors have led to numerous profit warnings at cyclical Dax companies over the course of the second half of the year. This burdensome situation has been compounded by the structural challenges facing the German automobile industry as well as by the problems afflicting individual corporations, for example Deutsche Bank or Thyssen Krupp. It is true that domestic business in Germany is ticking over nicely on account of the high propensity to consume…

Oil: How dependent is Saudi Arabia on US goodwill?

  The Brent crude spot price declined of late to as low as USD 58 per barrel. The main factor driving this renewed price slide was speculation that Saudi Arabia may expand production – in return for the recent public backing which the United States has given Riyadh in connection with the “Khashoggi affair.“ Saudi energy minister Khalid Al Falih announced that the desert state had ramped up its crude output from 10.6 mbd in October to “more than 10.7 mbd“ last month, explicitly in response to customer demand. However, anonymous speculation is flying around the market in the teeth of this official statement, claiming that production has been boosted to more than 11 mbd. In the context of the current “surplus supply debate“ and of market expectations that a supply cut by OPEC+ is in the immediate offing, it would obviously be extremely counterproductive for the price of black…

Fed minutes: The Fed back-pedals

The minutes of the last Federal Open Market Committee meeting held on 8 November 2018, which were published yesterday evening, revealed surprising news about the direction of the Fed’s monetary policy going forward. Although the minutes left us in no doubt that the US central bank will raise the key rate corridor by another 25 basis points in December, what was new was the intention of the FOMC to change the language used. Whereas it was previously indicated that a gradual increase in the federal funds rate was adequate, it could soon be communicated that further key rate hikes will be made strictly contingent on incoming data releases. Fed chairman Jerome Powell pointed out only a few weeks ago that the Fed was weighing up a slightly restrictive fed funds rate. Many market participants had therefore gained the impression in recent months that a 25 basis point increase every quarter…

Rouble stays unrattled in the Ukraine-Russia conflict

As the year 2018 gradually comes to an end, it is high time for the rouble to take stock. This is likely to paint a patchy picture for the Russian currency as it took quite a beating at times in the course of the year at the hands of the euro as well as of the US dollar. It had some reefs to circumnavigate – including the emerging markets crisis and the Fed’s more restrictive monetary policy stance. Primarily, however, in the past few months it has been the sanctions imposed on Russia by the USA that have put the country’s currency on the defensive. The first round of sanctions came at the beginning of April as a response to the alleged Russian interference in the US presidential election campaign. Further sanctions followed in August/September when the USA reacted to presumed Russian participation in the poison gas attack on the…

High Noon in Westminster

What is happening over Brexit has more suspense than any whodunnit – first the tough, long-drawn-out negotiations in Brussels and now the showdown in the British parliament. Now as before, Brexit is turning out to be a first-class political drama, whose provisional climax is due on 11th December. That is when the House of Commons will be voting on the EU withdrawal agreement. The situation does not look all that rosy. Various members of parliament are fighting tooth and nail against the proposed deal, albeit for very different motives. The faction of Brexit hardliners is fearful that the Irish backstop mechanism is a trap, committing Great Britain to a customs union with the EU in all eternity. Those who advocate a soft Brexit, by contrast, are hoping for a second referendum  – maybe to even be able to stave off an EU exit scenario. Meanwhile, Theresa May is attempting to…

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