ONE BLACK MONDAY:
CHINA SENDS THE WORLD SPINNING By AfroInvestors Research
weeks is not much when measured against a rise of
Angus Nicholson, of IG Markets, has an interesting
150% and you could argue it’s a natural correction.
take on the recent turmoil. He says the recent annu-
The respected Australian economist, Saul Eslake, be-
al meeting of the country’s top leadership must have
lieves the concerns about China, which are reflected in
seen some pretty heavy chat about the economy with
the sell-off there and overseas, are slightly overdone.
the country facing a momentous fork in the road.
Eslake commented that the country’s growing
service industry is gradually overtaking the manufac-
It is a key moment for China. The equity market in free
turing sector as a share of GDP. He also noted that the
fall, the banking system increasingly starved of liquidi-
property market in the biggest cities is “stabilizing” al-
ty, rising capital outflows, and a rapidly slowing economy.
though the smaller cities were “still weak”. And he believed that the recent devaluation of the yuan was not
an attempt to stimulate flagging exports but was a gen-
Beidaihe has ended (one of the reasons Li Keqiang
uine attempt to reform the forex regime and to try to get
was delayed in visiting Tianjin), and no doubt there
ahead of any possible rate cut by the US Fed. It’s a move
were very serious discussions over how the 7% growth
to be more flexible ahead of a Fed rate cut. The yuan is
target is going to be met. That target is now looking
up 20% in trade-weighted terms so they wanted wrig-
overly ambitious, and the most sensible way forward
gle room if the Fed cuts rates and the US dollar rises.
would seemingly involve further currency devalua-
The annual meeting of the top leadership at
FALL 2015 | afroinvestors.com |
31