September 2017

• There are no imminent signs that the global economic recovery is about to end. It is in fact accelerating: global growth should amount to 3.5% this year and 3.7% in 2018 (according to the OECD) – the fastest pace since 2011. The UK is the only country to have a deteriorating outlook; while the Eurozone, Brazil and Russia account for most of the upswing. However, there is a “but”: the recovery is synchronized, but lacks the momentum and strength required to make it sustainable. Also, productivity growth remains elusive. Watch for two things to determine whether expansion will endure: (1) rising real wages, and (2) increasing private sector investment.

• China’s peaceful ‘invasion’ of the world will be one of the big stories of the next 30 years. Starting from a very low base, Chinese outbound tourism is growing by almost 20% per year, versus less than 4% for the rest of the world. The population’s sheer size means that Chinese travellers are now ‘bigger’ both in terms of outbound numbers (a projected 200m by 2020) and spending (USD261bn last year) than their American counterparts. The impact on travel & tourism (10% of global GDP) and the global hospitality industry will be considerable. Even a major crisis in China would not derail the trend – it would merely slow it down.

• The Chinese central bank just decided to ban cryptocurrencies, triggering a fall in their value by as much as 20%. At the individual level, crypto-currencies help to hedge social and financial instability and to overturn taxation and regulation; but at state level they are viewed as a means to circumvent capital and exchange controls, and as a conduit for illegal activities. The clash between official and virtual currencies is just starting and there is fierce debate as to whether crypto-currencies are in bubble territory. The fact that 68 crypto hedge funds are now engaged in the world’s most crowded trade gives credence to the speculation argument. . .

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