People Are Suddenly Very Worried About China
Considering that in the past 3 months the only daily topic of relevance for the media has been “Donald Trump” both in the US and abroad, one would assume that when it comes to global policy uncertainty the primary source would be, record S&P 500 paradoxically notwithstanding, the United States. One would also be wrong, because while Trump seemingly remains the only topic worthy of discussion blanketing the airwaves, as the following chart from Goldman demonstrates, it has been China where policy uncertainty has stealthily exploded in the past three months according to policyuncertainty.com, while making virtually no new headlines.
But how is it possible that China, which is seemingly far more “concerning” at this moment than it was a year ago when fears about Chinese financial conditions and devaluation led to global market selloff and pushed the S&P into correction, has had virtually no impact on risk assets so far in 2017: clearly either the chart above, or the market, is wrong.
Conveneintly it is the same Goldman which has published an exhaustive report laying out the key risks to China’s growth, many of which have been discounted by the market which erroneously assumes that just because the world went though a China “scare” period one year ago, that the world’s second biggest economy remains contained. Far from it.
For those pressed for time, below is the summary of Goldman’s “Risks To China’s growth In The Year of the rooster” report, from the team of MK Tan:
- After meeting the 2016 growth target, Chinese policymakers are focused on stability ahead of the upcoming leadership reshuffling. This relative calm–we expect only a modest deceleration in growth in the Year of the Rooster—is coming at the cost of further increases in credit and other imbalances.
…click on the above link to read the rest of the article…
