Why are global markets so scared about China? It is not
economic growth per se that’s causing the fear but the risk
that an enduring economic weakness of the Chinese
economy could provoke the repatriation of asset from
abroad, particularly a reduction of the Chinese holdings of
US treasuries.
Any significant shift towards less dollar asset accumulation
would provoke higher US interest rates irrespective of any
FED actions. A surge of interest rates provoked by
Chinese asset reallocation has global implications.
Such a change would not only be poison for the US bond
and stock market, it could mark its arrow of death for US
financial assets and a global meltdown.
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