With the China shrinkdown in full flight, and western stock markets following Asia down the slippery slope, investors are scrambling to find a reason why this is not really happening. Lynette Lopez writes in Business Insider that the old fixes no longer work and the evidence certainly is compelling.
China’s Shrinkdown Has Been Happening for a Year
Call it a soap bubble or an under-inflated balloon, China’s key indicators are all down, and especially in terms of floor space under construction, railway cargo, and auto sales. While this may be partly due to the transition from an investment-based (industrial) economy to a domestic consumption one, this cannot be the only reason for the China shrinkdown.
We know that consumer confidence is down and uncertainty up in the unfamiliar waters of what President Xi Jinping calls “The New Normal”. However, he is showing no signs of intervening, and has warned politicians to ‘back off’. Speaking on his behalf The People’s Daily obediently added, “It should become a norm for officials to relinquish their power after retirement.”
We Are Not Halfway Through the Great China Shrinkdown
Economic analysts doubt whether Xi Jinping could reverse the China meltdown even if he risked his career on it. “In our view, China’s structural growth deceleration is only half-way through … under the weight of debt and excess capacity [with]weakening investment demand …” Societe Generale’s Wei Yao said in a statement over the weekend. We will just have to sit it out.
Shades of Déjà Vu from a Nursery Rhyme
Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall;
All the king’s horses and all the king’s men, Couldn’t put Humpty together again.
Plus ça change, plus c’est la même chose, the more things change, the more they stay the same. Or so the poem goes, with apologies to Mother Goose.