World Dependent on Chinese Growth
The Wall Street Journal writes:
Beijing’s struggles this summer have spooked many investors into viewing China as a threat to, rather than a rescuer of, global growth. During the financial crisis of 2008 and early 2009, China, with a colossal stimulus plan, acted as a shock absorber. Lately, it is China that is providing the shocks.
Over the past week, it has grown clear how dependent a growth-starved world is on China, which accounts for 15% of global output but has contributed up to half of global growth in recent years.
Given this dependency, one reason markets have been so unnerved is that China’s economy remains something of a black box. For starters, analysts have long wondered about the accuracy of government economic statistics. And levers pulled by Chinese policy makers can be unconventional. This is seen in Beijing’s desire to micromanage the yuan’s value, which undercuts its ability to pursue an independent monetary policy because of spillover effects on domestic liquidity.
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Quotable
“There cannot be a crisis next week. My schedule is already full.” – Henry A. Kissinger
“Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.” – Lawrence Summers
The global financial crisis – missed by most analysts – shows that most forecasters are poor at pricing in economic/financial risks, let alone geopolitical ones.” – Nouriel Roubini
“So how does the machine work that you have a financial crisis? How does deleveraging work – what is the nature of that machine? And what is human nature, and how do you raise a community of people to run a business?” – Ray Dalio
