About The China-Related Market Rout

The main topic in financial web sites these days is no longer the economically tiny country of Greece, but the very large economy of China. Stock markets in general, and the Chinese ones in particular, as well as commodity markets, have plunged due to worries about a serious downturn in the Chinese economy

It is difficult to say just how much China’s economy has slowed. Chinese economic statistics are even more unreliable than economic statistĂ­cs in other countries. Not in the sense, as some have alleged, that it overestimates growth systematically, but because it underestimates cyclical fluctuations systematically. In boom times, growth is underestimated while during slowdowns, growth is overestimated. Clearly, China is now undergoing a slowdown, but it is difficult to say how much because of the aforementioned unreliability.

What seems certain though, is that the global market slumps will make the Bank of England and the Fed postpone their planned rate hikes indefinitely, while for example Sweden’s Riksbank might cut its interest rate further from the current -0.45% level.


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