The Wide Angle

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1、DeutscheBankResearchGlobalEconomicsDate15October2014AuthorSanjeevSanyalTheWideAngleGlobalStrategist(+65)64235969TheAgeofChineseCapitalsanjeev.sanyal@db.comSummaryChina’sdomesticinvestmentcurrentlygeneratesadisproportionateshareofglobalinvestment.However,asthepaceo

2、finvestmentslows,thecountryislikelytogeneratelargecurrentaccountsurplusesoveraprolongedperiod.ThiswilltransformChinafrombeing“thefactoryoftheworld”tobeingthe“investortotheworld”.WedonotthinkarealappreciationoftheCNYwouldcorrectthesesurplusesbutcouldperverselyaddto

3、them.HowtheworldabsorbsChina’slargecurrentaccountsurpluseswilldefinethenextroundofeconomicexpansion.WefeelthatthescaleofcapitaloutflowfromChinacouldbesolargethatitmaykeeplong-termcapitalcheapeveniftheworld’smajorcentralbankstightenmonetarypolicy.Thisisthecontextin

4、whichweshouldevaluatetheIMF’snewcallforanincreaseinpublicinfrastructureinvestment.IndiacouldbeabeneficiaryofthiseraofcheapcapitalasittriestoreplicatetheEastAsianmodel,butitisnotlikelytoabsorbasubstantialportionofChina’sexcesssavings.Similarly,evenifGermanyincrease

5、sdomesticinvestment,themostwecanexpectfromEuropeisthatitdoesnotaddfurthertotheglobalsavingsglut.Thus,arevivalofinfrastructureinvestmentintheUSiskeytoasustainedrevivalofglobaleconomicgrowth.Thiswouldleadusbacktoaperiodoflargesymbioticimbalances–whichwedubas“Bretton

6、WoodsThree”.Farfromdecryingthisasafailureofglobalpolicyco-ordination,economistsshouldacceptimbalancesasthenaturalstateofbeingandtrytomanagetheaccompanyingdistortions.However,ifBrettonWoodsThreefailstotakeoffforwhateverreason,weshouldreconcileourselvestoalongperiod

7、ofmediocregrowth.Cheapcapital,inthisscenario,willcontinuetosupportassetpricesanddepressyields.Historysuggeststhatsomeofthischeapmoneywouldinevitablyfinditswayintotrophyassets.DeutscheBankAG/HongKongDISCLOSURESANDANALYSTCERTIFICATIONSARELOCATEDINAPPENDIX1.MCI(P)148

8、/04/2014.15October2014TheWideAngle:TheAgeofChineseCapitalWhoisnotinvesting?Inrecentweeks,anumberofeconomistsandpolicy-makershavearguedthattheglobalecono