Interest in China picks up as ripple effects build

WHEN veteran China watcher Shaun Breslin moved to Beijing in 1984 for university, his friends thought he was mad. China remained closeted from the outside world and was far from the $10 trillion (R135 trillion) economic powerhouse of today. The world’s gaze was instead fixed on Japan’s ascension and the tensions between the Soviet Union and the US.

Now, as turmoil on China’s markets ripples beyond its borders and some analysts say the country could be the source for the next global recession, UK-based Breslin is fielding a surge in requests to explain how the world’s second-biggest economy works.

“The Chinese economy has become an issue that most people now think in some ways relates to them, and is no longer just an international news issue for those interested in international affairs,” said Breslin, a professor of politics at Warwick University and an associate at Chatham House, a London-based international policy institution. “Even somebody in the pub collared me and asked what was happening when the stock market was in its big dive downwards.”

China’s economic slowdown was on display on Sunday, as industrial output and investment data missed economists’ estimates. Factory output rose 6.1 percent last month from a year earlier, while fixedasset investment rose 10.9 percent in the first eight months – the slowest since 2000.

Search terms

Breslin is not alone in noticing a pick-up in queries. Search interest for terms related to the Shanghai composite index of stocks from May to the end of last month were more than 10 times the level for the period from January 2011 to May, according to data supplied by Google.

That spike came as the Shanghai composite index tumbled more than 40 percent from its June high to erase $5 trillion in value from mainland bourses and triggering unprecedented government intervention to shore up stocks.

China’s currency is also garnering global interest. Google searches for terms related to the yuan renminbi, also known as the yuan, from May to last month were up 48 percent from the average level recorded from January 2011 to May. Over the same period, searches for terms related to the People’s Bank of China rose 51 percent.

Authorities shocked traders with a sudden move on August 11 to change the yuan’s exchange-rate regime and allow markets a bigger say in setting its value. The decision triggered the yuan’s worst losses in two decades and roiled currencies around the world as investors feared the start of a new round of competitive devaluations by governments to help their exporters.

“The China story has gone mainstream,” said Patrick Chovanec, the chief strategist at Silvercrest Asset Management Group in New York and a long-time observer of China who used to live in the country. “It is no longer just the typical China watchers commenting on what is taking place,” Chovanec said.

Investor focus

It has been a challenging year for China’s leadership. A boom-and-bust stock market, currency volatility and a deeper-thananticipated growth slowdown have disrupted a planned deleveraging of the economy and shift from a heavy-industrial model toward consumption and services.

Among the data released on Sunday was one bright spot: retail sales increased by a better-than-forecast 10.8 percent from a year earlier.

“Demand for insight on China has been high for a decade, as has popular interest in general news,” said Daniel Rosen, a partner at Rhodium Group, a New Yorkbased economic research house. “What has changed over the past two years is the difficulty of making accurate assessments of China’s economic performance.”

With such complexity, demand for deeper knowledge is only set to continue.

“There has been a significant increase in investor focus on China,” said Stephen Jen, the London-based managing partner at SLJ Macro Partners and a former International Monetary Fund economist.

“But my sense is that the level of understanding on China is about on par with that on Greece, which we all know is not right,” Jen added. – Bloomberg