Strong and sustainable growth for the luxury industry in Asia!

Asia as a whole is the heaven for the future of luxury industries more than ever. According to the economist’s views the economic crisis has little effect in the luxury industry throughout the world. For one simple reason: in the crisis, the poor get poorer, but the rich get richer, and the consumption of products they love increases because they have more resources to buy them, while general consumption stagnates or declines. In Europe, sales of luxury goods is expected to increase by more than 6% in 2013, while overall consumption stagnates, the United States will increase by more than 9% worldwide, 10% alone in Asia, excluding China and Japan, the increase in the sale of luxury goods is expected to be 15% and China at 20%, well beyond the expected GDP growth of 7%. This amazing forecast of 20% growth for luxury goods in China was announced on June 11 in Hong Kong by an luxury goods analyst at HSBC bank, in a speech entitled "The influence of China emerging market for luxury goods in Asia, "the French Chamber of Commerce in Hong Kong. Asia, excluding China and Japan, is currently the site of half the growth of sales of luxury goods in the world. The Chinese take an even more important in this area. 75% of revenues from the sale of luxury goods in Hong Kong and Macau are made by mainland Chinese. They are more likely to make the trip to Hong Kong and Macao, as well as Taiwan and Singapore, where they buy luxury goods. When a Chinese travel abroad, he spends an average of 875 Euros in products like branded watches and wine for men, jewelry and readymade garments for women.. No doubt he will reckon with the effect of campaigns by the Chinese authorities against corruption and for a lifestyle of modest appearance. But it seems that for the time being, this effect is limited to only a little lower the price level of goods bought - a watch 4 000 and not more than 10 000 - and especially to moderate the exhibition luxury. The affluent Chinese still want luxury, but a more discreet luxury. To say that the Europe has its part to play in this game and she plays so well. It is further necessary that the luxury industries are not disabled by retaliation against the Customs anti-dumping measures against Chinese solar panels.

The Future Economic Rebalancing Of The World

In 2017, no European country will be included in the top ten contributors to global economic growth. The emerging economies will account for fifty percent of global production of goods and services. According to IMF, in the year 2018 the proportion will increase to 55%. And this is only the continuation of a trend that began there more than thirty years and represents a consolidation in the global economic consequences. As noted by the chief economist of Goldman Sachs who invented the concept and acronym BRIC's in the 1980s when the growth of the Chinese economy was even more important today, a growth rate of China's economy 10% was less important to the world that U.S. growth by 1%. In 2013, the rates of equivalence are 8% and 4%. Today, financial markets are equally concerned of China slowdown as the U.S. recovery. No wonder that, as growth in emerging was much stronger than the rest of the world, and that their standard of living per capita has steadily catching up with the seven most industrialized countries. By the mid-1990s, countries such as Germany and Italy had dropped from the list of top ten countries with the highest growth rates. While in the 1980s, the United States accounted for 30% of global growth and Europe 20%; in 2017 no European country will included in the top ten contributors to global growth. Europe as a whole no longer and will contribute only 6% of it, while India and China will contribute to almost 50%. Even more surprising is the speed at which occurs rebalancing and this because of the masses in. The economic transformation and urbanization of China occur at a scale with the population is one hundred times greater than that of Great Britain at its early industrialization and a speed ten times. Thus the Chinese momentum is 1000 times that of Britain 200 years ago. This rebalancing is a return to the state of the world that existed in the early nineteenth century. But this is only small consolation because it is perceived as a stall and undoubtedly contributes to the gloom in US, as in the rest of Europe.

China takes control of its Currency

The Chinese government has recently reaffirmed its commitment to lead a prudent monetary policy. A message was signaled to all banks and other Chinese companies and foreign business partners. After a recent meeting, the Chinese government issued a statement which reads: "China will continue its prudent monetary policy in ensuring growth of credit to the real economy, the agricultural sector and small businesses." "Will continue", says the text, and in fact, the direction is not new. Publicly adopted in 2010, it is associated with a budget "proactive" policy, in force since 2008. On the issue of the exchange rate of the Yuan, the Chinese government encourages the continuation of the current rate "to a basically stable level." So if the Yuan is revalued, it will be a movement of low amplitude. Already at the end of last year, the new administration had announced their resolution to "expand wisely the amount of social financing to ensure a moderate emissions growth of loans." The Chinese economy is facing a double challenge: The first and foremost one is to maintain a growth rate of around 7% to ensure the increase of the population's standard of living and inflation under control, and the second one is to set right their export market which was seriously damaged by the European debt crisis which considerably reduced its export markets. To answer the western financial crisis, the Chinese launched in 2008, a multi-year recovery plan 4000 billion Yuan. They slowed and the slowdown the growth of their economy, but still fear that the financial crisis in their main customers being turned into an economic crisis, if the growth rate falls more below. The temptation is strong in these conditions, increasing the money supply. They have repeatedly reduced the benchmark interest rates and reserve requirements for commercial banks. But then tip the risk of inflation, which is not only a malfunction of the economy, but also the source of popular discontent, and thus a political danger. This is why banks are expected to deal with the "real economy", rather than seeking sources of short-term profit, spontaneous tendency of any financial institution. In this framework, they will be encouraged to provide loans. They will not be to fuel property speculation. The message is clear to European countries that China needs to export; it has no incentive to engage in any trade war. But it will remain master of its currency.

China facing a new threat of credit crunch!

Almost all the economists alarmed an increase in risk every day to see a new burst in credit bubble in Asia and now things seems to be clear now. The rating agency Fitch indicates that such event without precedent in the history of the modern world could burst in China. The Tribune does not beat around the bush; and citing a threat of a credit crunch. We have discussed these things already on various times. The occurrence of this new credit crisis may in turn be hit hardly soon. The main resources for these happening are the excessive growth of bank loans to the private sector and the loans outside the formal sectors etc which lend in turn more difficult to repay by the borrower. On Friday, the Chinese interbank rates showed a sharp decline, the refinancing rate to seven days - part of the cost of interbank lending - dropping from 11.62% to 8.33%, such a move could not be obtained thanks to rumors suggesting that the PBOC (the Central Bank of China) was pressure to release the donor funds, or it can intervene directly. Earlier, panic had seized the Chinese interbank market, the benchmark rate to a record high at 13.91%. In the end, according to Bloomberg, 50 billion Yuan (about 6.15 billion Euros) were injected into the market by the central bank. The situation with less tense will prevail in recent weeks and it will continue, and the worst is still to be feared to come out. Leading analysts consider that the PBOC should maintain its policy to severely restricting access to credit for businesses and individuals. Reasons behind this are; it will help to restrict the high level of bad loans held by Chinese banks. A context is that investors fear that banks are facing difficulties increasingly strong to refinance. During the past two weeks, the rate of refinancing had indeed soared, the Chinese Central Bank stopping the injection of liquidity, despite the economic downturn. A measure which provoked a strong restriction of access to credit, draping the exchanges while blocking the lending capacity of banks. Monetary authorities and Chinese policies now want to end the very rapid credit growth in recent years. It is true that there is an emergency, leading institutions in the viewfinder smaller banks, which have increased their loans while speculating heavily. A situation that pushes the government to "clean up" the banking market, closing the valve to riskier institutions, a policy may lead some to bankruptcy. Another worrying and not least: in May, a report released by the rating agency Moody indicated that informal lending outside the banking sector in China had increased by almost 70% over the past two years ... representative now the equivalent of 55% of gross domestic product (GDP). Financial products of the informal sector amounted at the end 2012 to 29,000 Yuan (3,600 billion Euros), according to preliminary calculations by Moody's. A narrower definition of the sector excluding loans fiduciary obligations and asset-backed companies, the informal sector would weigh only 21000 billion Yuan, but still 39% of GDP. The Moody's report indicated that parallel "informal banking sector could have a leverage effect on the finances of the wider economy and amplify fears of a credit bubble. The rating agency felt that the rapid growth of informal loans increased risks to the banking system and the Chinese economy as a whole. "Given the sheer size and growth of informal banking in China, we doubt the ability of banks to guard against a significant increase in defaults" in this area, yet warned by Moody's. In March, the Banking Regulatory Commission noted that it had ordered banks to control the funds asset management more closely in order to contain the risk and increase transparency. According to Fitch, Chinese banks have somehow hidden in a second parallel balance the equivalent of 2 billion loan mechanism to circumvent the official boundaries and new regulations put in place to curb the excesses. Practices that cause the bursting of a credit bubble. Because, according to Fitch, half of the loans must be renewed every three months and hence forth at least in less than six months. According to Charlene Chu, senior director of Fitch in Beijing, "The country has duplicated the entire U.S. commercial banking system in five years." Adding that the credit is increased from 9 000 to 23 000 billion dollars since the collapse of Lehman Brothers. "All this is far worse than anything we could know before in a major economy. We do not know what will happen. The next six months will be crucial, "said Chu also. For her, "the model of growth based on credit is clearly exploding. This could fuel a massive crisis of over-capacity, and potentially a Japanese-style deflation. " According to Wei Yao of Society General, the debt level of Chinese enterprises has reached the threshold of 30% of GDP, the threshold is nothing but a typical of financial crises.

The Gold Prices Falling Because of the Fed

The Federal Reserve has brought down the price of gold this week as investors reacted to the announcement of the U.S. central bank, suggesting that it would progressively restrict its extraordinary support measures to U.S. economy. The ounce of gold and has tumbled nearly $ 100 in the space of a week, from Thursday even below the threshold of 1300 dollars. This is something that had not seen for nearly three years. Friday, the price reaches $ 1295.45, which is its lowest level since mid-September 2010. Perverse effect of supportive policies, the Fed now considers the views of official figures, the economic recovery appears to begin in the United States no longer justifies the pace with which it buys Treasury bonds and mortgage-backed securities. These are the operations that are currently around 85 billion Euros per month. However, the withdrawal of these liquidity injections, which dilutes the value of the dollar, greatly reduces investor concerns about a possible resurgence of inflation. Thereby making the purchase of precious metals such as gold is much less attractive. The barbarous relic while losing its safe haven qualities, strengths as a bulwark against the rising prices are having so little appeal.

Some analysts believe that gold is now in a vicious circle, the decline in encouraging investors to liquidate ETF (investment funds backed by physical gold stocks). Thus, the most important of these funds, has seen its shares fall below 1,000 tons of gold this week. However, these new gold ETF disbursements weigh themselves on courses, racing somehow the machine. Meanwhile, physical demand is affected by the measures taken by the Indian government. The authorities have indeed raised the customs duties on the yellow metal, while the rupee is at a record low against the dollar. Now, gold imports will be allowed only for purposes of jewelry making. In addition, importers must now pay for their purchases in cash, without payment facility. India believes that these imports represent a significant portion of its current account deficit. A policy should reduce gold imports during the month of June, while India is the world's largest consumer of the precious metal. Finally, on the London Bullion Market, an ounce of gold finished at $ 1,295.25 at auction Friday night, against 1391.25 dollars at the end of last week.