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Post by Admin on Jul 8, 2015 20:29:28 GMT
China is a long way from Greece and the high-profile debt troubles of the Eurozone, but its stocks have been taking a far worse beating in recent days. On Wednesday, the growing investor panic over Chinese stocks shook confidence in Beijing's ability to manage its slowing economy and threatened to cause problems for overseas markets, including America's Despite increasingly desperate measures by the Chinese government to halt the slide, shares listed on China's main stock exchange in Shanghai fell nearly 6% Wednesday, piling on losses that have plunged the market by about a third since mid-June. Most Chinese stocks remain well above year-ago levels thanks to a raging bull market that began in November 2014 was egged on by Beijing. China's Shanghai stock market is still up 72% over the July 2014, despite the recent drops. But the sudden nose dive has sparked concerns about growth in the world's second-largest economy and has started to spill into other markets. Stocks in Hong Kong fell even more Wednesday while markets slid also in Japan, South Korea, Australia and other economies with close links to China. The gloom spread to copper and other global commodity markets, which are hugely dependent on China's economy. U.S. stocks also opened sharply lower Wednesday, despite rising hopes that Greece might be able to avert a disastrous exit from the Eurozone. The Chinese selloff has caught world markets by surprise as they focused on the slowly unfolding drama in Greece. But Lonski said the China bear market is potentially far more consequential by dint of China’s size and the potential contagion effects on the global economy and trade. The persistent fall is especially worrisome, analysts said, because it comes despite efforts by China’s central bank, the People’s Bank of China, to stem the stock slide through extraordinary measures, including declaring a halt to initial public offerings, and relaxing terms for margin borrowing. Both efforts have failed so far, and backfired by spooking foreign investors. Condon thinks Beijing can stop the rout with back-stopping measures by the Chinese central bank, but other analysts wondered whether the latest episode in China's evolving economy could set back financial and market reforms that many in the U.S. and other advanced economies have been calling on Beijing to continue.
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Post by Admin on Jul 9, 2015 20:34:10 GMT
We've been here several times before: a sudden and dramatic lurch in the Chinese economy that looks like it could be the Big One, the beginning of the end of China's economic miracle, perhaps even the beginning of the long-dreaded Chinese economic crash that would be globally disastrous. Every time, China's leaders have managed to fix the problem before it became a catastrophe. The Big One never comes. There are two schools of thought on this. One says this is because China's leaders are smart, the country's economy is basically healthy, and everything will be fine. The other says that these fixes are temporary, that China's leaders are kicking the can down the road, and that China's economy is ultimately unsound. Based on past incidents, it's a safe bet that China will pull out of this crisis as it has past crises. But, long term, I have always suspected that the pessimists were right, that China's economic model was unsustainable and doomed to collapse into recession and, possibly, the sort of resulting political turmoil the country saw in the late 1980s. One reason I believe this is that I am joined by some of the people in the best position to know: the Chinese leadership. The Chinese government knows it can't maintain power through censorship, propaganda, and riot police alone. It needs to maintain economic growth to keep Chinese citizens happy, but it also needs to slow down that growth to keep the economy healthy in the long term. The basic problem at the core of the Chinese economy is that it needs to be dramatically restructured to remain healthy. But Chinese leaders appear either unable or unwilling to make those changes, held back by the unusual nature of China's authoritarian, one-party political system. China's leaders have seen the problem for a while: They've been warning one another for years that their economic model was "unsustainable." But they never fixed it, which is why we're seeing this week's latest economic lurch. The reason they never fixed it isn't that the economy was unready, or that they didn't know what to do. It's that they are incapable of doing it. The very nature of China's authoritarian model, by basing its power on a sprawling governing elite that is heavily invested in the status quo, might now make it impossible for officials to do the things they need to do to keep the system afloat
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Post by Admin on Aug 12, 2015 20:33:09 GMT
China’s devaluation is an effort to stimulate an economy that is growing less rapidly than its potential. China is not in recession—probably—but its growth rate has certainly slowed. The devaluation will help, but don’t expect any immediate miracles. The official statement from the People’s Bank of China reads like something Alan Greenspan might have written. The gist is that they will let the yuan float against other currencies—maybe. I have my doubts about that. Monday’s move was large for a daily change, but does not take the rate outside of the recent trading range. Exchange rate policy cannot be separate from monetary policy. This is a commonly misunderstood notion. If a country, for example, is running an expansive monetary policy, increasing its money supply and pushing prices up, there is no way it can also push up its currency. If it tries to buy its currency using foreign exchange reserves, it is tightening monetary policy. There is really just one policy. China’s economic leaders may not understand this. (The United States has had a number of Treasury secretaries who didn’t understand it.) Expansionary monetary policy may help China’s economy accelerate. A declining exchange rate is one of the mechanisms whereby monetary policy helps the economy, but not the only one. As the exchange rate falls, the country’s exports become cheaper to foreigners, increasing sales volumes. Imports become more expensive to the country’s citizens, encouraging them to shift to domestically manufactured goods. So it’s a helpful policy.
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Post by Admin on Aug 14, 2015 20:13:05 GMT
Two massive explosions in the port of Tianjin, northern China, have killed dozens of people, left hundreds injured and devastated large areas of the city. Much of what took place, or is still happening now, is unclear - but here is what we do know. They took place at a warehouse at the port which was reportedly storing "dangerous and chemical goods". The building is owned by Tianjin Dongjiang Port Ruihai International Logistics. Ruihai Logistics was reportedly set up in 2011, and it handles about one million tonnes of cargo annually. Chinese media said that at least one member of Ruihai's staff had been arrested. Officials insist it is not yet clear what triggered the two blasts, about 30 seconds apart. Before the explosions, many firefighters were already at the scene trying to control a blaze, AFP reports.
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Post by Admin on Aug 26, 2015 20:22:32 GMT
The People’s Bank of China’s move on Tuesday to cut interest rates by 0.25% is another sign that China’s economic growth is weaker than previously expected. After the devaluation of the renminbi earlier this month that caused a potential liquidity problem in the banking system, the market expected the PBoC to cut interest rates and reserve ratio as a routine step. In fact, the market expected the rate cut would have been announced last weekend, and the delay of the announcement obviously contributed to the plummet of the market on Monday and Tuesday. Chinese growth is still largely investment driven, after so many years of considering a “soft-landing” of the economy because the government is still afraid that insufficient GDP growth would arouse social unrest. That is why it has returned to its old model as a short-term fix to reach its target of 7% GDP growth for this year, but the last government has already shown this strategy can’t be sustained. The Chinese stock market was driven up by the promise of the government that economic reform will be going on, and naturally when this promise breaks, the market crashes. Meanwhile, stock market regulators seem to have given up on direct intervention, as, after trying to prop it up, they have learnt they cannot buy all the stocks in the market. Meanwhile, Europe, the UK and U.S. stock markets all significantly rebounded on Tuesday; they were clearly over-sold on Monday. The Chinese stock market is not correlated with the rest of the world due to capital flow controls. Global investors perhaps don’t care what goes on in the Shanghai Composite Index; they care more about the growth of China. In the long-term, China needs to reform and rely more on organic growth of domestic demand. They should try to give more support to the private sector, as opposed to continually relying on state-owned enterprises. They should decrease transaction costs by reducing regulation that typically gives these enterprises an advantage and enhance protection of private businesses (especially in the poorer western regions); but that all seems a long way off at the moment. Instead, state-owned enterprises have shown their large ‘hindering’ power, by squeezing the room for private investment. In the long-term, if these reforms do not happen, China is not creating its own demand. It has long been expected that China would grow its own demand. With such a large population, markets globally would benefit. But if China is slowing down and reform is more remote, it is bad news for everybody and the global economy will lose an important part of future demand. It leaves the distinct possibility that global demand is going to stagnate, and it is something that is very difficult to cure.
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