Saturday, July 18, 2015

Economy: China Crash? What China Crash?

(Drivebycuriosity) -  China is in a deep mess - tell us the media. Many experts are lamenting that China´s economy is faltering and that Shanghai`s stock market is crashing. The bank Morgan Stanley even claims, that China could cause a global recession (bloomberg). Really?

I think that all the China skeptics are deeply wrong. Last week China´s stock market gained 2%, the stock index is up 22% year-to-date and climbed 92% in the recent 12 months. So what? The lamented crash (temporarely down 30%) is just a breather after a rally of 150%!

The claims about the faltering Chinese economy don´t stand reason as well. The recent data show that China´s economy is stabilizing and might even getting stronger. Last week we learned that China`s economy grew 7% in the second quarter, the same speed as in the quarter before (foxnews). In June industrial production grew 6.8%, faster than in May (plus 5.9%), and retail sales growth accelerated to plus 10.6% (May 10.1%). These is partly a response to reduced interest rates and other measures which are aming to rekindle economic growth. China is also benefitting from the sharp fall of oil and other commodity prices.

I believe that China will continue its exceptional growth thanks to a fundamental reform program, iniated in 2013, including huge investments into airports, railways and other infrastructure. China is still in the begin of a secular catching-up process which is fueled by extreme income & wealth differences to the US and other Western nation values. The huge country is rapidly transforming into a consumer economy like the U.S. and other modern countries (driveby). China will beome even more important as the growth engine of the world and Shanghai´s stock market will resume the rally.

But American banks and hedge funds - influenced by notorious China bashers like Jim Chanos and Paul Krugman (driveby) - are betting against the country, making a lot of noise to spoil the sentiment on the financial markets. I suppose that the continous China bashing is part of an old anti-Chinese attitude.  The facts - and reason - stand against those speculators.  I suppose that the China crash callers are on the losing side.

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