In Craig Stephen’s This Week in China he looks at the decision by HSBC Holdings to relocate its group chief executive officer from London to Hong Kong. He believes it sent a strong signal about where the bank sees its future.
New research from the HSBC economics team explains this move in a report entitled, "The Tipping Point — The rise of the East and Demise of the West."
The International Monetary Fund released forecasts saying the world economy will recover next year, but it will clearly be led by emerging economies, namely China with 9% growth in 2010 and India with 6.4% growth. That compares with US growth at 1.5% and a mere 0.3% for the Euro region.
Last week, US unemployment reached a 26 year-high of 9.8%. For the UK, the IMF warned of a structurally unsustainable debt mountain approaching a massive 13% of gross domestic product.
HSBC forecasts emerging nations will dominate world economic activity in the years ahead.
A key reason is the debt burden of the developed world. Recent policy may have stabilized financial markets in the West, says HSBC, but individuals and governments remain awash in debt. Banks no longer enjoy the funding conditions of old, and this will combine to be a drag on growth.
Looking ahead, difficult choices will need to be made on "exit strategies" from stimulus programs. The IMF says the British will have to get used to working longer after retirement and paying for health care. Alan Greenspan now says the US should consider tax increases to bring down debt.
The other trend HSBC economists highlight in their "tipping point" theory is that continued low interest rates will lead to global excess liquidity flowing into developing markets. That’s where the growth is, and where banking systems are robust.
MarketWatch has this excellent piece by Craig Stephens, which suggests that one potential scenario to which this HSBC analysis leads is the excess global capital being channeled into developing markets, not just driving growth but a new propensity for bubbles.