Uncertainty and the impact on the global economy make China a major factor China isn’t the only reason US stock market plunged last Friday. But it was a big…
Is China’s currency devaluation a sign of desperation? Is a hard landing now unavoidable? Everyone knew China’s double-digit growth rate couldn’t last forever. Optimists were hoping for a “soft…
It is the market that wants China’s currency to devalue, not China’s government As China’s recent currency devaluation rekindles the “currency manipulator” argument and rapidly enters the presidential campaign…
China’s decision to allow its currency to devalue by 2% on Tuesday (8/11/15) will certainly reignite the debate as to whether China manipulates its currency, primarily for the purpose of giving…
As China makes its gradual transition from communism to capitalism and from poverty to prosperity, it can be easy to lose track of how much progress China has made. The…
Will China’s stock market turmoil dent Xi’s stellar reputation in China? President Xi Jinping is actually a fairly popular leader, with people being drawn to his strong stands relative to corruption,…
China stock market characterized by leverage and non-market measures Increasingly it seems this will be China’s approach to its entire economy Fueled largely by leverage (buying on margin increased 500%),…
We do think that the decisive factors in the Chinese market are the explosion in leverage (margin buying) that occurred on the way up and the extremely high PE valuations. Any market built on such conditions will surely fall. How far is hard to say, but continued rise looks very difficult and unstable. As to the economic fall-out, the short term impact looks to be minimal. But China has greater economic challenges.
In light of all the bad news being reported from China—a slowing economy, mounting debt, rising costs, an increasingly hostile environment for foreign companies, and a political clampdown—we have prepared this series of blogs with the intent of providing some perspective to the dire assessments and predictions that have become so common of late.
Why China won’t start a currency war
Some said China’s small currency devaluation on August 11 would lead to a currency war. It hasn’t happened yet as China has not allowed the RMB to fall much below the level that was reached on the day of the devaluation. The fact is there is more reason for China to support the RMB than to let it depreciate. Here’s why that is the case.