What We Read Today 18 May 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary “reading list” which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number included.

• How Narendra Modi can transform economy in 6 months (Swaminathan S Anklesaria Aiyar, The Economic Times) The title promises meat; the article delivers spun sugar. The main theme is that the new prime minister of India, Narendra Modi, has good listening skills and is a good manager. It seems that this author has little in terms of policy suggestions for his “6 months transformation”. There is more about what Modi needs to address ‘behind the wall’ and in an article by Sanjeev Kulkarni at GEI Opinion.

• New Rules of the Game for China’s Renminbi (Arthur R. Kroeber, Brookings Institute) Was the recent quick 3% depreciation of the renminbi against the U.S. dollar currency manipulation aimed at increasing exports? The author thinks not.

The answer is straightforward. China has taken a huge step towards making its exchange rate more flexible and market determined. In doing so, the authorities have clearly signaled their intention to switch from a monetary policy that mainly targets the exchange rate, to one that mainly targets domestic interest rates. The change in renminbi policy is thus part of a broad and ambitious financial reform strategy, reflecting the agenda laid out last November in the “Decision” published following the Third Plenum of the 18th Party Congress. It is all about improving China’s macroeconomic management, and has little or nothing to do with boosting exports.

• EUR/USD Weakens as Investors Gear Up for Fresh ECB Stimulus (James Hyerczyk, FX Empire) A few weeks ago the euro was pushing against 1.40 to the dollar. Now it is 0.03 lower and has not yet established a base. Read a detailed analysis by Cliff Wachtel to be published at GEI Investing later today.

• Why China and Vietnam’s Dispute Is So Ominous (Matt Schiavenza, International Business Times) Anti-China sentiment runs deep in Vietnam as the country has for centuries resisted, sometimes unsuccessfully, domination and even occupation, by China. This past week repeated riots attacked Chinese owned factories and other commercial facilities in Vietnam and Chinese nationals were forced to flee the country. The provocation is China’s set up of an oil rig in the waters near the Paracel Islands. For background and a map see GEI News. The long bad history between the two countries casts a ominous shadow on the situation, but it could be even more ominous if China expands its assertive reach to other southeast Asia neighbors.

Today there are 12 articles discussed ‘behind the wall’. The last one is a mini-article length discussion sectoral balance accounting relationships.

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