China

To many in the Western world, China is still something of a mystery. 

Even as Xi works to liberalize the country’s capital markets, promote the yuan in international trade and investment, and generally open the country’s doors to the world, it’s still a strange, foreboding place in the eyes of the Western public.

Tales of censorship, “disappearing” journalists, and endemic corruption don’t help, and neither does the ambiguity inherent in attempting to run a communist state with a semi-capitalistic economy.

One topic we’ve spent quite a bit of time discussing is the rise of the PLA navy. 

2015 was the year Xi reasserted China’s maritime might - and not just in the South Pacific. 

With just two days left in 2015, the main driver of overnight global stocks and US equity futures remains the most familiar one of all of 2015 - crude oil, which, after its latest torrid bounce yesterday has resumed the familiar "yoyo" mode, and again stumbled dropping below $37 on yesterday's surprising API 2.9 million crude inventory build, as well several more long-term "forecasts" by OPEC members, with Kuwait now budgeting for $30 oil, while Venezuela's Maduro said the oil price fell to $28/bbl and is "headed downward."

Two days ago, an armed Chinese ship and two other vessels entered the waters north of Kuba Island and encroached on Japanese territorial waters starting at around 9:30 a.m. Kuba is part of the Senkakus which are at the center of a longstanding dispute between Beijing and Tokyo.

2015 was the year of considerable FX drawdown as desperate EM central banks attempted to rescue themselves from reality.

As Barry Eichengreen noted,

"Intervening to support an exchange rate that’s fundamentally overvalued is a fool’s game and a no-win situation, akin to a sovereign attempting to sustain an unsustainable debt burden rather than yielding to inevitable restructuring."