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China benefits and stabilizes

Von Dr. Oliver Everling | 27.April 2009

„All information I receive from China indicates that China is on its track of an upward trend“, says Dr. Rainer Rau of Feri EuroRating Services AG. America caused the crisis, China will be little affected, but Europe and Japan will have to pay the bill, says Rau. „China is benefitting from the current world economic situation“, believes Rau and shows some charts on indicators which make clear that the recessive factors did not hit China in the way expected or seen in other countries. Rau spoke at the yearly spring conference of Feri EuroRating Services in Frankfurt am Main, the leading meeting point for economic forecasts for the German credit and asset management industry.

Inflation is low, says Rau and shows key figures on inflation rates. In comparison, interest rates are still too high: Repo rates would have to be reduced to 0,5 % or less if any positive effect on economic activity should be expected. Real net exports or real foreign trade are heading downwards. Rau believes that those figures are the revenge for the industry structure in Europe, which largely relies on long-term consumer products and investment products.

In his speech, Dr. Rainer Rau spells out the key drivers for recovery: Increasing purchasing power due to low crude oil prices and low consumer inflation, impact of the monetary policy with low interest rates, sufficient liquidity and extension of credits with a gradual recovery in the home market, and fiscal policy programs (infrastructure, tax cuts) and sector programs (automotive industry and energy).

Since 1969, his first year in profession, says Rau, he has never witnessed such a breakdown of real new orders in Germany. Domestic and foreign orders run in parallel, shows Rau. „We are a totally export oriented economy“, argues Rau. „Everything, what is happening here at home, is just redistribution.“

According to the insights provided by Rau, world-wide recovery starts already in the course of 2009 as a result of stimulative measures. Losers of the recession are Japan and Germany because of high export shares and weak domestic demand. Long-term growth reduced by 0,5 %-points p.a. because of lower importance of financial industries, increased share of public activities and high public debt. Inflation remains under control, says Rau, and unemployment remains high.

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