Sweden and economic policy during corona  

Sweden managed corona probably somewhat better than most other European countrues in 2020-2021 but could have applied supply side and fiscal policy more actively.

China is now undergoing changes, often backed up by well-known Western research. The author attempts to find modified or new analytical factors which corporations should focus on.

Kina befinner sig för närvarande i en långtgående ekonomisk och social omdaningsprocess. Många strukturella förändringar är på väg – åtminstone om de politiska makthavarnas planer ungefärligen kan genomföras under de kommande åren. Den uppnådda och kvantitativa BNP-tillväxten har styrt många Kina-analyser. Framöver måste kineserna dock lägga mer fokus på bättre kvalitet i tillväxten. En sådan förändringsprocess kräver bl a förbättringar avseende teknologi, produktivitet och miljö – och detta i en omvärld, där marknadsekonomin tänks spela en ”avgörande roll” (Third Plenum 2013, kap I, 2, s 1). Av dessa nya trender följer att forskare, företag och finansmarknadsanalytiker i sin tur måste modernisera analysen av Kina på både makro- och mikronivå.

Economists – particularly foreign financial analysts, also in Europe – focus mainly on the Purchasing Manager Indices (PMIs) and quarterly GDP changes when analyzing Chinese growth. This is understandable since these data are easily available. More recently these data did not produce an optimistic picture for China’s economy. But does this information really provide reliable information on China’s growth performance and outlook? Does this analytical approach capture the strategy and policy changes announced during the Third Plenum in November 2013?

Certainly not. Consequently, foreign and even domestic investors run the risk that portfolio and particularly more long-term investments are too heavily based on short-term indicators that do not reflect ongoing structural improvement measures or policy changes.

The paper will summarize past and current discussion on Chinese GDP data and deal with the alternatives for assessing economic growth and its quality. Merely relying on an improved and widened analysis of Chinese reform policy since November 2013 is difficult and has its limits. But better analysis can be created by economists themselves even under current conditions. Transparency is still by far too poor. Improvements should not be that difficult to achieve all the same. Some ideas are given in this paper – and also hints how and where to find information on structural improvements that have taken place or are planned concretely for the nearer future.

Better insight into Chinese reform policy and underlying GDP-growth conditions could give a sounder input for decision-making by domestic, European and global investors, Swedish and German companies included. The ambition of the paper is to contribute to a move from too much short-term to more medium- and long-term analysis of China’s development - an approach that should be promising also from a European corporate perspective.

Avregleringar på finansmarknaden utgör en väsentlig del av Kinas påbörjade, omfattande reformprogram efter det s k Tredje Plenumet i november 2013. I artikeln undersöks i vad mån Kina kan dra nytta av en del negativa erfarenheter från den svenska finansiella avregleringsprocessen.

There is every reason for Europe, the U.S. and many other countries, organizations, and corporations to optimize to optimize their co-operation with China in line with with its necessary and implemented reforms - and to consider all the conflicts of goals that are part of the far-reaching Chinese reform program. Major Chinese reform disappointments would be scary since the European and Anerican economies would not be prepared for such a reversal. This is a mostly forgotten risk.

A review of the economic press and literature reveals that there is little research and analysis on the important issue of the Chinese governmental debt and budget deficits. This is astonishing since the Chinese economy has by now climbed to the second position in global GDP ranking. Thus, China’s government debt matters increasingly to the rest of the world as well, both in a corporate and a macroeconomic perspective.Furthermore, not enough is known about the real size of the total Chinese government debt. Insufficient statistical transparency is an important reason for this shortcoming, but this should not serve as an excuse. Increasing efforts are needed to provide China and the rest of the world with better information on the real state of Chinese government debt. In this paper, an attempt is made to explain and discuss the real situation when it comes to the Chinese government debt. The current Greek/Southern European debt misery clearly shows that opaque statistics cannot be hidden away forever without sooner or later puzzling and/or frightening the financial markets. On the other hand, China cannot be analyzed completely with Western eyes. The sooner Chinese decision-makers decide on greater transparency in the government debt situation, and decisive steps towards more efficient fiscal policy are taken, the better the consequences for China itself and the global economy. The alternative - continuous opaqueness and a possible future fiscal explosion - could certainly do a lot of harm to China, but also to the global economy. There is no reason to underestimate this medium and long-term risk. The short-term perspective looks safer.There should be room for a greater exchange of views and co-operation between EU and China, too. The EU’s own bad experience from the past few years could be a realistic starting point.

The predictability of financial crises is widely regarded as low. However, skills linked to market psychology (behavioral finance) and the understanding of history and macrofinancial aggregates have been insufficiently integrated in the forecasting and risk management of financial institutions. Traditional financial modeling can no longer be applied as nicely as in the past. In Sweden, the financial crises of the early 1990s and in the latter part of the past decade were caused by overconfidence, control illusion, and herd mentality - but also by shortcomings in management and corporate governance. There is no evidence that these two serious Swedish banking crises were not foreseeable. The general question is when and under which circumstances financial decision-makers and authorities should listen to the usual minority of warning voices. One conclusion is that economists should be more in house-oriented, and top managers should heed their professional opinions. Conclusions from this paper can also be drawn for China, India, and other emerging markets both when it comes to financial deregulation policy and government debt risks in deregulated financial markets. © National Association for Business Economics.

The quality of Chinese statistics is still lagging which can have an impact on the whole global economy...