Apropos the report, "Chinese recession is the biggest tail-risk to global markets: BofA-ML survey" (August 19), the injection of a huge amount of liquidity into global economies after 2008 had built up enormous capacity additions that have now become a drag.
China's growth plunge and yuan devaluation are only a measure of its desperation to push exports up in the face of reduced domestic demand and stock pile-ups. This is part of the bigger picture: The US is unable to generate demand, India cannot step up supply due to poor growth of the infra sector, the euro zone is wrestling with unresolved structural issues that have been present since its inception and South American nations are facing high inflation levels with huge fiscal deficits.
The past four decades show that high oil prices had been coterminous with a surge in global economy. At the zenith of global well-being in 2007, oil was at $147; now it is at the sub-$50 level. The story of other commodities is no different, portending a stasis in world growth. For instance, Indian steel companies have failed to leverage the current low cost of raw materials because they are combating low global demand as well as a dumping from China.
The yuan devaluation is no currency war. Almost every nation is struggling to overcome the after-effects of many a modern economic tenet gone awry after the 2008-09 cataclysm.
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number
China's growth plunge and yuan devaluation are only a measure of its desperation to push exports up in the face of reduced domestic demand and stock pile-ups. This is part of the bigger picture: The US is unable to generate demand, India cannot step up supply due to poor growth of the infra sector, the euro zone is wrestling with unresolved structural issues that have been present since its inception and South American nations are facing high inflation levels with huge fiscal deficits.
The past four decades show that high oil prices had been coterminous with a surge in global economy. At the zenith of global well-being in 2007, oil was at $147; now it is at the sub-$50 level. The story of other commodities is no different, portending a stasis in world growth. For instance, Indian steel companies have failed to leverage the current low cost of raw materials because they are combating low global demand as well as a dumping from China.
The yuan devaluation is no currency war. Almost every nation is struggling to overcome the after-effects of many a modern economic tenet gone awry after the 2008-09 cataclysm.
R Narayanan Ghaziabad
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number