Thursday 9 July 2015

China; not more threatening than Greece

Interesting to see the Chinese Government so swift to act to stop a large stock market rout. Not sure that  Capitalists would approve of banks being asked ot lend money to companies to buy their own shares - seems a bit gamey perhaps?

Still, it has done the trick of stopping the share collapse. The Chinese are struggling to allow stock market trading into their retail trading base. Much like we do with AIM etc, the propensity for the newbies to get robbed is high and as a Communist state this has some downsides.

They seem to have licked it for now and the impact on the UK is minimal, far less than a Grexit or indeed huge EU bailout of Greece could be,

In time China will go pop big time. The Government have decided to print money at an alarming rate to keep up the growth profile. The money is printed in the back of the $5 trillion of US Dollar T-bills that the US is never going to redeem. They are merely playing the game according to the rules they have learned.

Of course, this leads to massive over-investment and poor investment choices, as well as rampant asset inflation. All in all, a disaster, but the underlying strength of economic growth will provide a big shock absorber. The rise of the US did not stop in 1929, neither will China's crisis in 2015.


Nick Drew said...

one assumes the Chinese govt has hands firmly on all the levers, but do they know wot to do?

and can anyone call the timing on the inevitable, haha

Budgie said...

Well at least it seems we will only have to deal with (another) Greek bailout, rather than Grexit. Headline for tomorrow's Telegraph: "Greek deal in sight as Germany bows to huge global pressure".

There is something creepy about the EU's ability to resurrect itself from the ashes of failure so many times. It almost makes China look normal.

Phil said...

Well I've just looked at our forecast for the second half of next year and for some reason the figures for China have dropped off a cliff. I'm not sure why - I'll try to get some more analysis later, but in the meantime it looks like the stock market collapse that the Chinese government has papered over was caused by something going severely wrong with the real economy.