1. Is the world economy headed for a soft or hard landing?
It’s barely landing. The US has sneezed, and the world says “Gesundheit”. The US slowdown is having less impact because it is not the only locomotive anymore. Growth this year will be about the same as last year, continuing the recent record string.
2. Is the renminbi overvalued or undervalued?
The renminbi is severely undervalued. The Chinese trade surplus is prima facie evidence of that and I cannot understand how anyone could possibly reach another conclusion.
3. What should be the role of the IMF/World Bank?
The IMF should concentrate on preventing crises and helping to control currency crises when they occur. I think it erred badly in the Asian crisis, which has hurt its credibility. It also serves a more minor role as a forum for trade and currency issues, and a compiler of data on trade and international investment.
4. Are sovereign wealth funds to be applauded or feared?
It depends on the country. For a commodity exporter, a sovereign wealth fund is a prudent reserve against periods of lower prices or forced lower production. For a predominantly industrial country, it is largely a way of avoiding dealing with trade surpluses that are destabilising their own and the international systems. In other words, it makes sense for Saudi Arabia, but not for China.
5. Are emerging market crises a thing of the past?
There will be another one. However, as countries have become more sensible in their policies and as growth has begun to dominate in Asia, the number of potential victims is falling. High commodity prices are making crises less likely for now, because the commodity exporters are the most likely source of problems. When commodity prices fall and/or the world economy slows, the next crisis will occur.
