Reuters
Gordon G. Chang, Daily Beast: How China Could Crash the Global Economy
Markets have paid too much attention to what the Chinese government says, and too little to what the economy is not doing.
“China has a major adjustment problem,” George Soros told a conference in Sri Lanka on Thursday. “I would say it amounts to a crisis. When I look at the financial markets, there is a serious challenge which reminds me of the crisis we had in 2008.”
Soros is wrong on one important count. The next global downturn, which looks like it is now beginning in China, will be worse than the one last decade.
Last week, China shook. Twice—Monday and Thursday—a just-installed “circuit breaker” mechanism, designed to limit volatility, caused Chinese stocks to crash. All of the market gains last year were wiped away in just four trading sessions. By Thursday, the widely followed Shanghai Composite Index lost 11.7 percent, while the Shenzhen Composite was off 15.2 percent. That meant the destruction of about $1.1 trillion in wealth.
WNU Editor: Gordon G. Chang has been predicting the end of the Chinese boom-economy for years .... but he may be correct this time. He he is also not alone in predicting dire times ahead .... The China Syndrome: The Coming Global Financial Meltdown (Zero Hedge).
1 comment:
People are concerned because China holds so much of our debt. I would be much more concerned over the following:
China's 1 child policy has put it in a massive demographic crisis. There are millions of unmarried single men, raised as "little emperors" who have little prospect for marriage. This causes a great deal of resentment, especially as the trillions of newfound wealth left these men feeling extremely entitled, as well as responsible for taking care of their parents after they retire. A failing internal system can bring resentment of the government.
A rising nationalist movement within China, as the "Middle Kingdom" (literally the center of the World) flexes its muscles. The mid-90's Taiwan Straits incident left a VERY bad taste in their mouth, which led directly to CHinese military expansion and the adoption of the Anti-Access, Area Denial strategy in the China Sea.
Internal pressures may lead to an expansionist foreign policy, and the relatively inexperienced CHinese military needs a "Short Victorious War" against one of it's neighbors to get that experience.
A friend of mine was a teacher in CHina for several years, and he feels that China, especially if they are unable to reign in their corrupt economy and avoid a recession, may start a war in the region, which may spiral out of control.
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