Major 2018 Risks (Part 3 of 4) - Prospects For China, Japan and EM in 2018

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The Asian Liquidity cycle remains in an upswing. Investment prospects in 2018 look bullish because of three factors – persistent Chinese monetary easing, monetized capital inflows from the US dollar and a significant change in Japanese monetary policy from liquidity-management to implicit Yen targeting. We have been Asian bulls throughout 2017, having sensed that the regional liquidity cycle had bottomed in 2016 and was in the early stages of recovery. Two factors to look out for are the growing importance of the Chinese Yuan as a transaction currency (it will ultimately displace the US dollar) and the economic impetus coming from China’s vast geo-political vision – the Belt and Road Initiative – as it stretches into Central Asia. Vietnam and Kazakhstan are consequently economies to watch in 2018.

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