Investment in China – good for Europe?

Posted by: Paul Donovan

17 Jan 2020
  • China's official GDP data was not surprising. Markets are rarely surprised by Chinese official GDP data. The economy in 2019 was the slowest in nearly three decades – but it was supposed to be. Population growth is the slowest in nearly six decades, and growth is a combination of how many people work and how hard they work.
  • Europe had some good news in the Chinese data, in that investment spending improved in December. Chinese investment growth is still weaker than official GDP or retail sales, but it is this number that matters. About half of the Eurozone's exports to China are investment goods.
  • The European Trade Representative, Hogan, suggested that US President Trump's policy of taxing American buyers of goods partially made overseas might be "misguided." Economists generally agree that the uncertainty of the Trump trade taxes has had some longer- term economic damage.
  • US President Trump nominated two new Fed governors. Investors have a cyclical and a structural question for any Fed nominee. Is the nominee hawkish or dovish, given current economic circumstances? (Both are probably dovish). Does the nominee support an independent central bank? (One, Shelton, may not). Central bank independence is the key reason inflation has stayed low and stable.

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