Sunday, April 17, 2016

Last Chance Gas For China To
Avert An Economic Crisis
Ambrose Evans-Pritchard article sees China's leaders are blowing their last chance to avert an economic crisis .. "The likelihood that China will fail to grasp the nettle of reform in time to avert a structural crisis is rising from probable to almost certain. As the well-meaning premier Li Keqiang keeps warning his colleagues in the Standing Committee, the current course leads straight into the middle income trap .. China's debt overhang has exploded, leading to a deflationary vicious circle .. While the IMF does not use the term, China is basically in a 'debt-deflation' trap. Earnings have been dropping more quickly than nominal interest rates, automatically tightening the noose. 'The ability of many Chinese listed firms to service their debt obligations is eroding,' .. My fear is that China's latest stop-go cycle will roll over just as inflation rears its ugly head in the U.S. and the Federal Reserve starts to tighten in earnest. That would be frightening. Storm protection for 2017 might be a wise precaution."
LINK HERE to the article

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