Sunday, October 16, 2016
China launches manned space mission; Xi sees global economy in precarious state; Let the pound fall and economy rise
1 China launches manned space mission (BBC) China has launched two men into orbit in a project designed to develop its ability to explore space. The astronauts took off from the Jiuquan Satellite Launch Centre in northern China. They will dock with the experimental Tiangong 2 space lab and spend 30 days there, the longest stay in space by Chinese astronauts.
This and previous launches are seen as pointers to possible crewed missions to the Moon or Mars. An earlier Tiangong - or "Heavenly Palace" - space station was decommissioned earlier this year after docking with three rockets.
China plans to expand the lab over the next few years by sending up additional modules. It is expected to be fully operational by 2022. China is only the third country - after Russia and the US - to carry out its own crewed space missions. In 2013 it successfully landed its un-crewed Yutu, or Jade Rabbit, rover on the Moon.
2 Xi sees global economy in precarious state (Gulf News) China’s President Xi Jinping warned Sunday that the global economy remained in a precarious condition as leaders of the BRICS group of nations tried to find ways to fire up growth in the troubled bloc.
Speaking at a summit in the Indian state of Goa, Xi told his host Narendra Modi and the leaders of Russia, Brazil and South Africa that the club of emerging powers had been undermined by both domestic and international woes.
But the leader of the world’s second largest economy said the long-term forecast for Brics members was positive as he called for more confidence-building measures. Brics was formed in 2011 with the aim of using members’ growing economic and political influence to challenge Western hegemony.
The nations, with a joint estimated GDP of $16 trillion, set up their own bank in parallel to the Washington-based International Monetary Fund and World Bank and hold summits rivalling the G7 forum. But the countries, accounting for 53 per cent of world population, have been hit by falling global demand and lower commodity prices, while several have also been mired in corruption scandals.
3 Let the pound fall and economy rise (Larry Elliott in The Guardian) Put the Brexit vote to one side for a second and ask yourself the following questions: is the economy currently unbalanced? Is growth too dependent on consumer spending and asset price bubbles? Is the productive base of the economy too small? Is it a problem that the UK is running a balance of payments deficit worth 6% of GDP, bigger than ever before in peacetime?
If your answer to these four questions is yes – as it should be – then you need to accept that there is an upside to the falling pound. Indeed, many of those who are now talking about a sterling crisis were last year bemoaning the fact that Greece – trapped as it was inside the eurozone – did not have the benefit of a floating currency and so had to use a brutal internal devaluation involving wage cuts, pension reductions and welfare retrenchment to restore its competitiveness.
Britain has discovered a way of living beyond its means. Assets are sold to overseas buyers bringing capital into the country to offset the balance of payments deficit. It is the equivalent of a once well-to-do household that has fallen on hard times pawning the silver to keep up appearances. At some point, referendum or no referendum, the financial markets were going to say enough is enough and it is delusional to think otherwise.
Running permanent balance of payment deficits amounts to borrowing growth from the future. Sooner or later, it has to be paid back and Brexit means it will be sooner. A weaker pound works by making exports cheaper and imports dearer. The effect, as after all the other devaluations and depreciations of the past 100 years – 1931, 1949, 1967, 1976, 1992 and 2007 – will make the economy less dependent on consumers and more reliant on producers.
Will dearer food and the coming squeeze on living standards will prompt a change of heart about Brexit? Remainers should not bank on it. Life has not been great for many in recent years anyway. What’s more, Britain is a country with a streak of cussedness that delights in having its back to the wall.
Profound economic change is usually the result of a convulsive shock, of which Brexit is clearly one. The referendum should lead to a period of national introspection and a willingness to address the fundamental vulnerabilities of the economy. If it doesn’t, the opportunity to set sail from fantasy island will be lost.