China Reduces Liquidity

[Rambo35]

Personally I am glad that one powerful country takes the right steps in order to ensure long-term economic prosperity. Economic reports show that bank lending as well as aggregate financing in Chinese Yuan dropped much more than expectations and I applaud China for doing what is right and not doing what is popular.

Everyone seeks the easy way out and they never think about longer term negative impacts which end up costing more than if the right decisions would have been made. Japan and the US will be stuck devaluing their currencies and experiencing stagnant growth (as Japan has done for the better part of two decades).

China reduces liquidity in order to prevent bubbles and financial meltdowns and while there are plenty more issues China needs to resolve this one is by far one of the most mature decisions they have undertaken, at least in my opinion.

 

[Pharaoh]

It's more than just preventing bubbles (like containing the growing excess industrial capacity in certain sectors), it's also to try to cushion the impact of existing bubbles (most notably, housing prices).

 

[Marmot]

There are a lot of bubbles in Chinese economy, that are more considerable than the housing prices. Like the PRC Government is still artificially lowering the Yuan in order to keep the low prices of the chinese goods on the international markets. I think playing the same rules, that most of the developed countries arr playing will force the Chinese economy down considerably.

 

[bigdolly]

Their huge industrial advancement made their economics choppy and difficult to control. Chinese goverment acts vigorously but I think they've already slacken the reins and internal crisis is blowing up.

 

[Zhuk]

They were managed to handle the overproduction crisis in 2012, however, they still need to find more markets, otherwise they'll be screwed.

 

[Pharaoh]

Personally, other than housing and, to a lesser extent, retail space, I don't see anything else in China that qualifies as a bubble. I do see a lot of other areas that are modestly on the excessive side and have the potential to turn into bubbles.

China has been doing a good job of aggressively pursuing not only more external markets, but also locking up contracts for raw materials. The biggest worry for them (and everywhere else) is another crisis like 2008 that causes a massive drop in demand. The increased development of internal markets over the last 5 years would provide some insulation, but not enough if a new crisis exceeds the one in 2008.

 

[Jamie77]

I could see an environmental crisis wreaking havoc in China (and thus with Chinese currency) one day, but I'm not sure when that day will come.

 

[Pharaoh]

I could see an environmental crisis wreaking havoc in China (and thus with Chinese currency) one day, but I'm not sure when that day will come.

Going from an agrarian society to an industrial society always causes environmental havoc. It happened all over Europe, it happened in the USA, it happened in Mexico, and it's happening in China.

Think of it this way - first, those factories and jobs are needed at all costs. Then, once the money is flowing in, people look around and realize they are living inside a pile of industrial waste. At that point, new laws get enacted to try to contain and clean up at least some of the mess.