From Chris Wood’s GREED & fear:
·An Abe premiership also increases the likelihood of continuing strife with China. While Beijing appears, for now at least, to have the ability to turn on and off the anti-Japanese demonstrations at will, the most recent episode must have triggered some real soul searching amongst Japan Inc to hedge further its bets.
·Wealth distribution in China is apparently far more skewed than previously thought. The skewed wealth distribution highlights one reason for China’s continuing high savings rate. This is that poor households do not have the means to consume while, as in the West, the rich have already maxed out on their consumption.
· China will be potentially vulnerable to capital flight if the wealthy should suddenly become nervous about macro stability and related political risk. Still for now GREED & fear would assume that this is only a potential vulnerability rather than the current reality. There is also a lot that could be done quickly to close the trap door should it be viewed as necessary in what in theory at least is still a closed capital account.
More on China:
GREED & fear had one particularly interesting meeting in Beijing last week. That was with the Chinese academic who published a fascinating survey of wealth distribution in the mainland in May (China Household Finance Survey, by Professor Gan Li, China Southwestern University of Finance and Economics). The key conclusion of the survey was that wealth distribution is far more skewed than previously thought. Thus, the survey found that 10% of the households had 86.7% of the total wealth, 84.6% of total household assets, 74.9% of the savings and 57% of the total disposable income . The average net wealth per household is estimated at Rmb665,187 while the median value is only Rmb24,000. The survey also estimated that total household savings account for 19.25% of income, with 55% of the households having no or almost no savings while the savings rate of the richest 10% households is 60.6%.
The survey of more than 8,000 households appears to have been methodologically sound and should, therefore, be taken seriously. Perhaps the key conclusion is that the skewed wealth distribution highlights one reason for China’s continuing high savings rate. This is that poor households do not have the means to consume while, as in the West, the rich have already
maxed out on their consumption. But the other point about this survey is that its findings are, potentially at least, politically explosive. This is why it was interesting to learn that the author, who spends his time between universities in Texas and Chengdu, has apparently encountered no official negative reaction to the publication of the survey’s results.