Why Should We Worry about Economic Growth in China?
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Transcript of Why Should We Worry about Economic Growth in China?
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Why Should We Worry about Economic Growth in China?
By www.TraderNewsAndReviews.com.
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What happened to the Chinese economic miracle?
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In the land of “managed capitalism” all is not well as economic growth slows.
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Why should we worry about economic growth in China?
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It is one thing if the economy of a small country tanks.
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But what if the second largest economy in the world heads crashes?
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What happened and how will trouble in China affect your investments?
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The New York Times writes about how China fell off the miracle path.
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For years now, Donald J. Trump has been sounding the alarm on China, calling it an economic bully that has been “eating our lunch.”
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The crux of Mr. Trump’s attack is that Beijing manipulates its currency to keep it cheap and give Chinese exports an unfair advantage.
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But that narrative is so last decade. China is now a threat to the United States not because it is strong but because it is fragile.
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Since the 2008 financial crisis world trade has fallen sharply, national debts are up substantially and countries are going back to autocratic rule with self-destructive consequences.
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In all of these categories China leads the pack.
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Adding to China’s worries is the shrinkage of its working age population due to the one couple, one child policy.
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For years China’s economy grew at 10% or more and its purchase of raw materials from around the world was a boon for developing nations.
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China claims that its growth is in the 6% range but many believe that 4% is closer.
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In order to maintain growth China is running up its debt funding poorly thought out projects.
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The end result is an acceleration of their debt which has hit 249% of its GDP.
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Why again should we worry about economic growth in China?
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Investor’s Business Daily describes China’s multi-trillion Yuan debt as scary.
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Slowing growth amid rapidly escalating debt has troublesome implications.
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Much of the credit is going to unproductive uses and propping up bad debts.
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The longer that continues, the bigger the eventual debt implosion may be.
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A China debt crisis would ripple through the global economy.
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Commodity producers that rely on China demand would buckle.
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Global financial markets would see a stampede away from emerging markets and risk generally, exacerbating the direct effects of a China hard landing.
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U.S. Treasuries, gold and other traditional safe havens may fare well, but not much else.
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China is an old hand at covering up its problems and hiding the true facts.
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The International Monetary Fund estimates that around 15.5% of commercial bank loans totaling $1.3 Trillion are at risk in China.
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15% to 19% of outstanding loans are nonperforming according to estimates from Hong Kong and this could go as high as 25% which is nearly twice the IMF estimate.
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So, Why Should We Worry about
Economic Growth in China?
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As Chinese orders for raw materials fall off developing economies across the globe suffer.
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They in turn will buy less from US exporters.
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In fact, Reuters writes about underlying weakness in U.S. manufacturing.
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When no one offshore has any money and lots of debt no one buys U.S. products.
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China could end up selling off all of its US treasuries in a last ditch effort to prop up the Yuan.
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And as a last result China could resort to military adventurism in an effort to drum up patriotic support back home as the economy tanks.
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