HONG KONG Oct 28 Who has aught to fear in a
world of risk while the Fed keeps its dreaded taper at bay?
Few, it would seem. Asia's markets will be hanging this week
on whatever comes out of the FOMC meeting. If Mr. Bernanke
murmurs even a word on U.S. economic growth that might warrant a
pullback in the Fed's asset purchase programme, the water will
start to drain all too quickly again from emerging Asia and head
back to Wall Street, or north to Japan, Korea and Taiwan in a
vain search for an export boom that has yet to materialise.
The chances of Bernanke reviving the taper talk are slim,
however. Sixteen days of Uncle Sam sitting on his hands can have
a surprisingly numbing effect on economic growth, economists
warn. So the Fed should stay dour, which means money will search
for relative performance in Asia.
Our gaze passes then to China, the second-largest economy
and Asia's great hope for new demand. There, we find a
leadership revving up iPhone-worthy pre-launch buzz over their
upcoming Party Plenum next month.
Will the Communist Party risk growth and stability to
overhaul a broken, bloated model that is literally spewing
poison? Or will it take the path of least resistance: cosmetic
change that leaves vested interests intact, plasters to a
Markets seem to be forcing Beijing's hand towards the
former. Since the great fiscal suicide attempt on Capitol Hill,
money has been flooding into China -- ostensibly from companies
repatriating dollars stashed offshore. They seem to have figured
out China's brand of financial repression doesn't work if
Beijing can't count on the issuer of its biggest reserve
In the past, China's central bank would just buy up all
those dollars at a fixed exchange rate and invest them in U.S.
Treasuries. That doesn't seem like such a smart option anymore.
Nor does selling all those yuan and letting them further inflate
China's credit bubble. So the People's Bank of China has been
letting a record-high yuan climb at its fastest pace since May.
That alone could hasten China's efforts to rebalance away from
exports in favour of consumption. Power to the people.