As the debilitating drama proceeds in Washington, in China the International Monetary Fund announced in a backhanded compliment that it had revised its growth prediction for GDP this year up to 6.7%. But the IMF also warned that to achieve the goal of steady growth beyond this period required “deep reforms to transition from the current growth model that relies on credit-fed investment and debt.” That is a tough one. This, remember, is the year of the 19th Congress, and the visible hand is having an impact as we predicted. And it is amazing what can be achieved with total control. But surface and deeper reality are two different things, and making fundamental changes to the structure – we’ll see later this year and next.
The other top news of the week was the protest last weekend in Shanghai by home-owners who had bought apartments in a grey commercial use buildings that had been repurposed for residential use without gaining the necessary approvals. The authorities relented and gave the owners the right to live in the apartments (but not, apparently, the right to sell), thereby defusing the problem. The incident highlighted again the relationship between the party and the people. As we have suggested before, China has entered a new era of class struggle. This time, middle class versus ruling class. It is only rarely that the struggle breaks through the surface.
Meanwhile in Washington, it is reported Trump is considering firing Mueller who, it is said, is now investigating him for obstruction of justice. Our view remains that Mueller, Comey and others like them in the system understand the danger this man represents and are implementing a plan to remove him using tools provided both by the Constitution and by Trump himself. We hope Mueller proceeds with all speed to allow this one to break through the surface, too. Even further afield, there was the British election, and a near defeat for the party that created the vote on Brexit and the Golden Era with the other end of the Silk Road. Our view at the time of the Brexit vote was that it probably would not happen in the end. That view just got a shot in the arm.
Changeable weather, boys and girls, stay well.
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