Analysts and big money say it’s time to reinvest in China on the back of growth and rising prosperity. But global headlines point to rising geopolitical confrontation which could see China sanctioned, or even a hot war with the US. The real issue may be China’s rapidly declining demographics.
The market is talking about a no-landing scenario – but should be watching what Central Banks are saying, and China’s position re Ukraine. The market remains vulnerable to recession and rising geopolitical tensions. They are very closely linked.
While the rest of the world hiked to fight inflation, China has embarked a sprint to reopen the economy; easing rates, mortgages, property lending and loans. The question is can it succeed when demographics, trade and the laws of growth may have already moved against them?
Political instability is turning into a global competition as Bolsonaro supporters storm Brazil’s Government, the CCP reopen China’s Borders to chaos, and the US Speaker deals with political hi-jackers to secure his seat. All will have consequences and should make markets nervous.
Markets love drama… from the next corupto-coin exchange to collapse, rising interest rate threats, and riots in China in the face of a Covid meltdown. But drama and reality seldom coincide – events are more prosaic!
Last week saw a succession of fundamental shifts in how the global economy is working: inflation, China’s reopening, western politics, crypto, Climate Change, Tech stocks, and in Ukraine. These all have significant potential market implications.
The Fed roiled markets over the pace and scale of rate hikes, but ultimately markets are about growth. The big issues were not thinking about enough are global recession, slowing trade, and the threats China’s evolution into a Surveillance State raise for future growth.
When the fact change, change strategy. The enthronement of Xi Jinping represents such a moment – and comfirms the big theme for coming decades: The Middle Kingdom vs the West.
Blain’s Morning Porridge – July 13th 2022: How long and deep is Inflation, and how close is China to a…
The world is watching for signs confirming global recession, so naturally markets have rallied (!). Political instability is resolved to be replaced with some bleak truths and spending choices. So.. steady at the wheel, nothing to worry about then?