Is China Heading For A Fall?

CashBackForex

Active Trader
Apr 19, 2012
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Cork, Ireland
www.cashbackforex.com
There are many segments of the global economy that are inter-related, concerned with the strength of the Chinese economy. We do get weekly snippets of statistics which supposedly are an accurate portrayal of economic activity, but can we rely upon those numbers, and do they give us a complete picture?

So many economies depend on a vibrant and growing Chinese economy. Australia and Brazil are big suppliers of iron ore for the infrastructure in China. Brazil, Argentina and the US are suppliers of agricultural products. The employment of Chinese labor, moving from the farms to manufacturing in the cities, provides the developed world with cheaper manufactured products.

Europe, the largest destination for Chinese exports, is now suffering from a recession. As their exports slow, so will their trade surplus. This surplus has long been invested in US Treasuries. What happens if they no longer have money to finance the US trade deficit?

There is a comprehensive article in Barron's called Falling Star, which is a must read for all traders. The article is lengthy, but the problems confronting the Chinese economy are complicated. Many of these issues are going to influence markets for years, even decades.

The Barron's article begins;

"The Chinese economy is slowing and is likely to slow a lot more. Get ready for a hard landing.

After three decades of annual growth averaging 10%, China's bullet-train economy is slowing markedly. Economic problems in Europe and the U.S. are stunting export growth, long the primary driver of China's economic miracle. Growth in industrial production has likewise been decelerating for months. This year growth in gross domestic product could slip to 8% - and it may get a lot worse from there. Though recently announced interest-rate cuts and a ramp-up in the government's already massive infrastructure spending could postpone the day of reckoning, to us it looks like the Great China Growth Story may be falling apart."

It looks like "irrational exuberance," to borrow a phrase from Alan Greenspan, has no boundaries.
 
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Fxpipper

Master Trader
Oct 26, 2011
1,132
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Yes but where China and India are concerned, they have enough resources to put up with any immediate constraints due to a economic slowdown. Actually, China's situation is a bit more shaky than India, but it should still see it through any economic crisis.
However, the impact on asian giants will be immediately felt in the asian region and will impact all currencies. Remember, any slowdown on the economic front will put a temp stop to the runaway inflation that's common in these asian giants..
 

Fxpipper

Master Trader
Oct 26, 2011
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Actually, contrary to BBC reports, the unrest is not being held in small numbers but in reality, whole villages are protesting against the communist party. But yes, the economic downturn will have a residual impact on inflation, food prices etc.
As it stands, inflation is quite high, both in China and India. Whereas, with India related figures, we usually get the real picture but when it comes to China, most of the data is fudged, which makes it harder for us to judge the real picture vis-a-vis China.
And given the recent fiscal announcement, will China take any steps to shore up the crumbling economy?
 

aburnun22

Trader
Sep 6, 2012
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The biggest danger for China, if the economy starts contracting, is the surging unemployment rate that would probably spur mass people's unrest.

+1 on that. They have the biggest population in the entire world and it would be interesting if the jobs available can cope up with that.generic viagra
 
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Nov 26, 2012
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www.forexticket.in
Part of the solution would be promoting trade among developing countries instead of depending on Western economies, as it is happening between South American and African countries. Today Chinese and Indian leaders are holding a meeting in order to promote trade between these two countries. Let's see if it works...
 

Fxpipper

Master Trader
Oct 26, 2011
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All bets are off, given the leadership changes in China and likely leadership changes in India and the current US deficit along with eurozone crisis is just making things a lot harder to read..
 

ezekiel chew

Trader
Dec 14, 2012
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www.asiaforexmentor.com
China is not heading for a fall. China cannot fall. It is the second largest economy after the US. China is struggling to overtake US but is a tough task for China. Its standard of living are getting higher and higher.China's manufacturing has hit 14-month new high.
 

MonsterTrader

Trader
Jan 18, 2013
7
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I doubt that China is heading for a fall and if anything a period of less rampent export driven growth would be a good thing to rebalance the economy away from exports and towards consumption.

However, the risk is that the west may view China as being about to fall or may even think that it is in crisis, when it isn't. This kind of thinking could actually impact western economies more and depen the economic crisis. So if anything the west maybe heading for a fall.
 

MikeM

Trader
Feb 6, 2013
2
0
12
I wouldn't worry too much about China. You can't grow so fast forever, and they are sitting on US$ cash. I think they will slow down a bit but still they are going to do well.
 

Fxpipper

Master Trader
Oct 26, 2011
1,132
4
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No China is not going to fall, and neither are the other economies. The problem though lies in stagnation and all signs indicate that a slowdown in china is bound to happen soon as the market corrects itself.
However, since China has manipulated the currency market esp their currency, chances are it may happen much later than anticipated.
 

sammcgee

Trader
Mar 16, 2013
2
0
12
China economy is only strong in 21 century. It's slowing now. I think it can't improve much in near future with their recent head's policy.
 

Fxpipper

Master Trader
Oct 26, 2011
1,132
4
49
Actually that's correct - sort of. Yes, of all the economies in the world, these two did overcome the fiscal crisis. But the problem with China and stagnation still continues where as with India it has to deal with multiple issues on corruption. All bets are on India overcoming these issues in the near term, due to a very proactive media and democracy. Unfortunately, China can only head in the other direction if it hopes to overcome the stagnation issue - which will lead to more stagnation, protests from landowners and the list just goes on..
Either way, at this stage, these are some of the assumptions doing the rounds and that's about it.
 

Fxpipper

Master Trader
Oct 26, 2011
1,132
4
49
The latest trends vis-a-vis china is that the consumer demand is shooting up, surprising many analysts. Short term analysis points to an increase in inflation and the Korean crisis not helping..