Economist 7/6/16

  1. THE easiest way to squirrel electricity away in times of plenty, for use when it is scarce, is to pump water uphill with it.Such pumped storage is widely employed where local geography and hydrology permit, but it does need two basins, at different heights, to act as reservoirs, and a supply of water to fill them. A firm called ARES which stands for Advanced Rail Energy Storage is using rocks instead. The rocks stand in for the water in a pumped-storage system. They are carried up- and downhill by a train that is thus the equivalent of the turbines. The track the train runs on is equivalent to the tunnel. And the motors that drive the train act, like the electrical kit of a pumped-storage turbine, as generators when they run in reverse as the train rolls backwards downhill, pulled by gravity.The hill ARES has chosen has a gradient of about 8%. The track itself is just under 9km (about 5½ miles) long. The company estimates that its proposed system will be able to store 12.5 MWh of energy, and deliver it back to the grid at a rate of up to 50MW. That is still small compared with pumped storage
  2. The AIIB (Asia Infrastructure Investment Bank) reflects China’s new eagerness to institutionalise its official lending abroad, which has been generous but contentious.It is billed as China’s “21st-century” answer to lenders like the World Bank (always led by Americans) and the Asian Development Bank (dominated by Japan).China’s financial commitment to the AIIB is equivalent to less than one percent of its remaining reserves. Almost 70% of the institution’s $100 billion of capital is drawn from its other 56 participants.Unlike the World Bank, which is pulled hither and thither by its members, the AIIB will keep a tighter focus on infrastructure. It has no sitting board or permanent branch offices in borrowing countries. It is also quick, approving four projects within six months of its launch date. More established multilateral lenders can take a year or two to do the same.Any assessment of the AIIB’s safeguards must also consider the alternative. If the new institution did not exist, China would presumably lend the money bilaterally, escaping any scrutiny by its peers. It has instead invited outside participation, precisely because it wants the respectability such partnerships confer.
  3. South Korea’s exports have fallen every month year-on-year since January 2015. In early June the central bank trimmed its benchmark interest rate by 0.25 percentage points, taking it to an all-time low of 1.25%.Growth has slowed from an average of 4.4% between 2001 and 2011 to 2.8% since then. The slowdown in China, the destination for a quarter of South Korea’s exports, has been especially painful.This week the government said 60,000 people might lose their jobs in the shipbuilding sector, which employs 200,000 in total and accounts for 7.6% of South Korean exports. 
  4. Earlier in June Ms Park had urged “bone-crushing” efforts to overhaul the industry and prop up its three biggest yards—Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries (which last year reported combined annual losses of 6.4 trillion won)—promising to pump 11 trillion won into state-run lenders saddled with loans to them.All this is expected to weigh on already-feeble consumer spending.But the frequency of such packages—three since Ms Park took office in early 2013—suggests that they are hardly cure-alls. A 41 trillion won stimulus in 2014 was followed by another 22 trillion won last July, after an outbreak of Middle East Respiratory Syndrome dampened consumption. Given South Korea’s relatively low debt-to-GDP ratio compared with other rich countries, at around 37%, it could afford to make the latest spree three times bigger.Moreover, the government has not been quite as loose with its money as the occasional splurges suggest: half the latest package will be financed either with money left unspent from last year’s budget or with this year’s higher-than-expected tax receipts.

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