China crisis? Looking for black swans in white snow of Davos

A man walks past a display showing symbols for world currencies on the exterior of a bank in Beijing. The rise of debt in China was among the issues raised at the World Economic Forum in the Swiss reosrt of Davos yesterday. (AP)
Updated 23 January 2018

China crisis? Looking for black swans in white snow of Davos

LONDON: Consumer debt in China, a dirty bomb and an antibiotic-resistant pandemic — all potential candidates for the next “black swan” event.
The annual gathering of global leaders, economists and thinkers in the Swiss alps yesterday looked to predict where the next big global shock would likely emerge.
Speaking at a panel on “The Next Financial Crisis,” Harvard professor Kenneth Rogoff said the Chinese economy was especially vulnerable to shocks caused by a rise in interest rates.
“If interest rates went up, the places that weren’t enjoying as much growth and had a lot of debt — Italy, Japan for example, some emerging markets — they could have a lot of problems. I certainly see China at an earlier stage of this. They didn’t have the financial crisis (in 2008), they did a great job, but they do have a lot of the characteristics of a typical financial crisis building up.”
The sharp rise in household debt in China has been flagged as a potential threat to the global economy, with the IMF recently warning the country’s dependency on credit could be a catalyst for the next financial crisis.
Vice-governor of China’s central bank, Zhu Min, told Reuters on Tuesday that China has little room for raising benchmark interest rates as inflation remains subdued and authorities are trying to reduce the economy’s debt burden.

The world’s second-largest economy expanded 6.9 percent in 2017, accelerating for the first time in seven years due partly to an export-led recovery, defying concerns that intensifying curbs on industry and credit would hurt expansion.
So what should the central bank policy response be if the another financial crisis were to suddenly materialize?

Historically low interest rates worldwide mean there is limited scope for central banks to tackle future financial crises, the session heard.
Still, Professor Rogoff downplayed fears of another big recession, telling the audience that financial crises have a “long afterlife” and that “we’re actually at the tail-end of the last one.”

Speaking on the same panel David M. Rubenstein, co-founder and co-executive chairman at investment firm The Carlyle Group told the audience he was worried about so-called “black swans,” a 9/11 type event that could produce a recession without warning.
He said: “The biggest problem I have is most people think there’s no problem of a recession this year or even next year. Generally when people are very happy and confident, something wrong happens. So I am nervous that the conventional wisdom is that there are no problems.”
Rubenstein also highlighted the high level of US government borrowing as a potential concern for the global economy.

“At some point people will wake up and (see) the US government has 20 trillion dollars of debt,” he said.

MODON to establish integrated pharmaceutical complex

Updated 23 May 2019

MODON to establish integrated pharmaceutical complex

JEDDAH: The Saudi Authority for Industrial Cities and Technology Zones (MODON) has signed an industrial land lease covering more than 62 thousand square meters in the city of Madinah, to build a pharmaceutical complex including research and development centers, with a total investment reaching SR 570 million.

MODON’s Director General Khalid bin Mohammed Al-Salem said that the signing of the contract was the result of joint work with the National Program for the Development of Industrial Compounds. MODON provided various facilities and incentives to support the investment, with the project set to provide nearly 1000 jobs for both genders with a localization rate exceeding 50 percent.

He added that the project is in line with the goals of the National Industrial and Logistics Development Program (NIDLP) to localize the most advanced industries in the world, in accordance with Saudi Vision 2030 for economic diversification.

Since its inception in 2001, MODON has been developing integrated industrial lands in accordance with the highest international standards. It currently oversees 35 industrial cities under development in various regions of the Kingdom, in addition to supervising private industrial parks and cities. The developed industrial lands exceeded until today 198.8 million square meters, while the existing industrial cities include 3,474 productive factories.