Maybe China’s economy will be alright after all. At least for the next few months, anyway. We’re beginning to feel a little uneasy about the ‘China crash’ scenario, given it’s become a mainstream story lately. Recent currency volatility (which we wrote about yesterday) and stories about rationing credit to the property sector have elicited quite a few worried articles from the mainstream media in recent days.
The latest is from Max Walsh at the Financial Review, under the headline, ‘Is China headed for a hard landing? He speculates that while China helped us sail through the GFC, it might drag us down during the next downturn.
Max then goes on to cite a fund manager survey conducted by Merrill Lynch which says that in February, the biggest concern for 46% of respondents was a hard landing in China, up from 26% in December.
That’s obviously a reflection of China’s perilous credit bubble getting greater public attention, as its myriad problems become too hard to ignore. But it also shows that concerns over China’s economy are not on the loony fringe anymore.
The real question is, while fund managers might be concerned, are they actually doing anything about it? Well, if you follow the money, the answer is, no they’re not. They’re going long stocks. That is, they’re certainly not selling on concerns over China. They’re heading to ‘safety’…large US multinationals that will apparently offer a safe haven in the event of a greater than expected China slowdown. Right…
Or perhaps they’re just betting that China will renege on its reform agenda if things get too hairy, and turn on the credit taps again. We don’t know about that line of thinking. The credit taps are still open, they were never turned off at all. And reform? What reform? There’s been plenty of talk but little in the way of action.
The way we see it, China’s credit bubble is losing steam under its own weight, with very little input from the authorities. But with the whole China thing now becoming a mainstream issue, we’ll leave it alone for a while. For that you’re no doubt thankful…
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