In one year, China has used up $ 676 billion of its reserves, which had reached a total of $4 trillion. It could let the remimbi fall and restore monetary autonomy in order to lower rates and boost an economy which is in recession. But this only serves to worsen the volume of debt in dollars, which of course erodes the status it seeks for its currency. The only solution: EU, US help for China.
There are apparently two imminent threats to the world economy which is the reason why the markets have tumbled: the damage low crude prices could cause for investments in the oil sector and the global financial system, and the fact the fall in oil prices may reflect the sharp slowdown in China. But both of these issues seem cloudy.
Danny Quah | For three decades now, many of the world’s most insightful observers have predicted the imminent demise of China’s system. But these same three decades have also seen China confound expectations. China’s economy turned in double-digit growth rates. China lifted 600 million people out of poverty.
Hopes for a soft landing in the Chinese economy are fading away. Focus sharpens on renminbi as it dips to increasingly low levels, challenging Central Bank’s massive interventions. China still commands sweeping foreign reserves but, over the latest months, they have shrunk by nearly one trillion dollars. Markets fear they could meltdown forcing a massive depreciation.
Caixin | Last month, the G-20 summit held in Turkey endorsed the G-20/OECD Principles of Corporate Governance. As a G-20 country, China is on board with the standards, too. That means Chinese companies, especially state-owned enterprises, must adhere to the principles.
UBS | Our base case forecasts for China’s growth are already below consensus at 6.2% for 2016 and 5.8% for 2017. In this note we study the impact on global economies and assets of a much darker and, in our view, extremely unlikely scenario where China real GDP growth slips to 4%, and nominal growth below 1.5%.
Huo Kan and Wu Hongyuran via Caixin | China’s banks are successfully managing 1.92 trillion yuan worth of non-performing loans, but tomorrow could bring a flood of bad debt.
From July 2014 to date, the dollar has risen by 17% and this increase is one of the reasons why the U.S. economy registered paltry growth of only 2% y-o-y in the third quarter. But the market thinks that the strong dollar is here to stay and it is becoming a factor that US policymakers must consider.
UBS | We reviewed the financial statements of 134 banks to understand loan exposure by industry as well as to try to estimate the size of private – sector lending versus state – sector lending.
Caixin | The Communist Party’s 18th Central Committee released a proposal for a major economic development plan on October 29 at the end of a four-day plenum, the fifth time the body has met. In the proposal, the party notes that China still has a lot of room to grow, even though it is facing an array of challenges stemming from shifts in the domestic economy and uncertainty abroad.