It seems that all is not lotus blossoms and shark-fin soup
in China these days … as one respected analyst has estimated that the economic
growth rate there fell to 1.7% in the fourth quarter of 2014 versus the
official rate of 7.4% … see:
Breitbart Article.
And one reason to believe that China might be experiencing such a GNP paroxysm is that the world-wide demand for commodities … oil, copper, steel, etc. … has also fallen
off the shelf. If China, one of the primary drivers of the growth in
such commodities, has experienced such an indicated slowdown, then it would
follow that its requirements for these materials would also plummet.
As indicated in this very interesting article referenced
above, the side effects of this economic slowdown in China is that it is
exporting deflation and is beset by capital and labor outflows which put its large
internal debt burden in a precarious position. China’s ability to manage its
way through its current economic problems is far more consequential to world
economic health than today’s political theater in Greece. As indicated, if
China is forced to sell much of the $1.3 trillion of United States sovereign
debt it now holds, interest rates here will naturally elevate … independent of
the machinations of the U.S. Federal Reserve Bank. This would also strengthen the
dollar more which, in turn, would then depress commodity prices even further.
It appears to this investor that the key to continued
strength in world economies and stock markets is now held in Beijing and not in
Washington and Brussels … or even in Riyadh,Saudi Arabia.
