Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19
Silver Is Cheap – And Getting Cheaper - 7th Oct 19
Stock Market Back to Neutral - 7th Oct 19
Free Market Capitalism: Laughably Predictable - 7th Oct 19
Four Fundamental Reasons to Buy Gold and Silver - 7th Oct 19
Gold and Silver Taking a Breather - 7th Oct 19
Check Engine Warning Light ECU Dealer Diagnostic Cost - Land Rover Discovery Sport - 6th Oct 19
Natural Gas Reloads For Another Price Rally - 6th Oct 19
Understanding and Purchasing different types of Plastic Building Materials Online - 6th Oct 19
Craig Hemke: Ignore the Elliott Wave “Buffoons” Calling for a Gold Crash - 6th Oct 19
Stock Market 6 Month Trend Forecast Conclusion - Video - 6th Oct 19
The True Causes Behind the Yield Curve Inversion and Gold - 5th Oct 19
Strategies on how to be a Successful CFD Trader - 5th Oct 19
Gold Stocks Correction Underway - 5th Oct 19
Climate Change When the Levee Breaks - 5th Oct 19
Federal Reserve Bank ‘Guarantees’ Dow Will Not Sink Below 26k - 5th Oct 19
The Russell and Transportation Tell A Completely Different Stock Market Story - 4th Oct 19
Confidence Drives the Economy and Trump’s Trade War Is Killing It - 4th Oct 19
ADL Predicts Crude Oil Prices Will Fall Below $40 - 4th Oct 19
Investing Money? Why You Need a Reputable Accountant - 4th Oct 19
Stumbling Manufacturing and Rising Gold – Now or Later? - 4th Oct 19
Silver Eyes Fourth Quarter Rebound - 4th Oct 19
Gold Price Forecast to Exceed $10,000/Ounce - 3rd Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

China – The Next Economic Ill-Wind?

Economics / China Economy May 29, 2010 - 05:07 AM GMT

By: Sy_Harding

Economics

It’s been one world economically, a global village, for years now.

The competition between major countries is no longer fought on the high seas, or on land with vast armies, but in board rooms and markets. That China is a communist country politically is no longer a concern. The competition is economic, for instance whether China’s semi-capitalistic economy, having already surpassed France and Germany, will soon surpass Japan to become the world’s second largest economy behind the U.S.


The big concern in the U.S. is not which country has the largest navy or nuclear arsenal, but whether China, Japan, and the oil exporting nations, will continue to buy U.S. bonds, and hold U.S. dollars in their central bank reserves, happy to be the largest foreign holders of U.S. debt.

The global village aspect and intertwined economic dependence on each other can be seen in the way global economies enter and exit recessions together, and see their stock markets enter and exit bull and bear markets together.

It should be no surprise then that the economic worries blowing over Europe this year have circled the globe.

Chill winds picking up in China haven’t attracted as much attention yet, but may soon.
China’s economy has been growing at a blistering pace for years, which has not escaped the attention of global investors. China’s stock market gained 600% from its low in 2005 to its high in late 2007. It then plunged 72% in the global bear market of 2007-2009. And it subsequently surged up 107% in the new bull market (while the U.S. market gained ‘only’ 80% to its recent peak).

However, there hasn’t been much recognition that the Chinese stock market topped out again last July, and has now declined 27%, officially in another bear market, even as its economy remains one of the strongest.

Stock markets typically look ahead six to nine months and react now to what they expect economies to be six to nine months in the future. Is China’s stock market forecasting trouble ahead for the Chinese economy?

That’s an important question given how important China’s booming economy has been to still fragile global economic recoveries. Prosperous Chinese consumers are sucking in the exports of other countries at such a pace that China’s imports at the end of March were 65% higher than a year ago (creating China’s largest trade deficit in over six years).

So, where is the potential problem that has had the Chinese stock market concerned since last July, well before the debt crisis in Europe popped up as an additional worry?

It is probably that real estate in China is in a bubble, and stock markets know what bursting real estate bubbles do to economies. Property prices in China have been rising sharply for several years and soared at a record pace in March, up an average of almost 12%, but more than 50% in some overheated cities, from a year earlier.

The Chinese government is obviously worried, and trying to let the air out of the bubble in a controlled manner. It has raised the amount of reserves its banks must hold, thus discouraging lending, raised mortgage rates and the size of required down-payments. Most dramatically it is now requiring 40% down payments on second homes in an effort to halt the rampant ‘flipping’ of real estate for quick profits by speculators.

Large global investors like BlackRock, the huge New York mutual fund group, and Boston’s State Street Global Advisors, are among the sellers of Chinese stocks, BlackRock indicating it believes China’s economic growth has peaked, that the efforts of the Chinese government to cool off its real estate industry will have a negative effect on the overall Chinese economy.

That does make sense. A booming real estate market has an outsized effect on economies, creating jobs and business for all manner of supporting industries; producers of construction, electrical, and plumbing materials, furniture and appliance manufacturers, carpet and candlestick makers. Letting air out of the real estate bubble in China is no doubt necessary, but raises uncertainty about China’s overall economy, which is now more than ever of importance to fragile global economic recoveries.

The economic storms in Europe are more than enough potential problems to keep investors occupied, but the economic clouds potentially forming in China also need to be watched.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website www.StreetSmartReport.com, and the free daily market blog, www.SyHardingblog.com.

© 2010 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules