Cheming Yang
Which can move faster? Snake or horse? In a very short dash, snake may be. But in a long race, horse will definitely win out. As we are seeing off the snake year and welcoming the arrival of the horse year, we cannot help wonder what the Chinese zodiac forebodes.
There is an old Chinese idiom, tiger head followed by snake tail, which denotes some thing with a good start ends badly. So there is nothing splendid about snake tail in a cultural sense. However, this snake did not go out without a bang. The end of the tunnel of QE has finally appeared.
If we need to draw an analogy from these animals for the economy, we might be finally on our feet in the coming year. Snake is a reptile without feet. They can only move on the ground. In the past few years, world economy moves like snakes with the support of QE in the sense that it did not really take off and the recovery failed to cover a lot of distance. With the horse year arriving, can we expect we are finally going to gallop?
Printing money to stimulate economy does not mean economic activities per se. As such, I am inclined to say the global economy in general still falls flat on its face. So it moves but only on the ground. A lot of think tanks and analysts fear for the end of QE. However, weaning from the QE should be welcomed as a sign that the economy might be able to stand on its own without crutches.
2013 GDP is roughly 7.7% for mainland China, 3% for Hong Kong, 10% for Macau and 2% for Taiwan. We saw declines in GDPs in recent years with the spiking of real estate prices in all these areas. If GDP represents the total amount of economic activities, how can real estate prices continue to rise when the economic activities are decreasing? The only explanation is that all the extra money artificially created by QE flows into the housing market which is treated as a safe harbor and also a play ground for speculators. Therefore, no QE is definitely better than even a little QE.
There is another Chinese idiom and it is horse related: your horse will lead you to success. It is usually used for best wishing in Mandarin. 2014 might be the year when the world economy can finally gallop on its own feet once again. The great Chinese circle will certainly benefit from the recovery of world economy. With the decrease of QE quota, we might see some traffic bumps that slow down the speed of the economy chariot. All in all, the horse year does look optimistic economically 6 years after the big slump.
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