Thursday, April 28, 2016

China’s Debt Is Everyone’s Problem
"China is not as economically secure as it seems. Convulsions in its financial markets have heightened global investor risk aversion and have added volatility in recent quarters. Try as they may, Chinese policymakers have been unable to stem the massive outflow of capital brought on by the current winter of dollar liquidity. Beijing seems perfectly content to bide its time, pumping audacious and improbable amounts of credit into the system, much as it has done in the past. But this time, neither the markets nor the Chinese people are confident that such aggressive stimulus policies will work. The veneer of Beijing's efficient, competent and formidable autocracy has fractured, and through the cracks seep China's geostrategic ambition—and the integrity of its currency. But here's the problem: The size and reach of a country such as China confer on its domestic economy enormous influence over the global economy. Because China is so critical to the international system, Beijing's debt, rightly or wrongly, is the world's problem to share .. An old market adage about the dollar is that it is America's currency but the world's problem. The ensnaring frostbite of the dollar liquidity winter is bearing this out. Similarly, it may be China's debt, but it's everyone's problem."
- Stratfor
LINK HERE to the essay

1 comment:

rbblum said...

So concerned about the debt of China? . . . As though the US dollar backed by the full faith and credit of the government OR the increasing, unsustainable US debt is insignificant.