Strategy Video: China's Financial Markets Pose More Immediate Threat than Economy
• China is the second largest economy in the world and has developed into a critical financial hub
• An economic slowdown and impending lending crisis are impending threats but vague in their timing
• In contrast, the rapid swell in China's stock market makes for an imminent and clear risk
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There are a number of lurking threats to the global financial system. China is arguably one of the larger risks. An economic downturn in the world's second largest economy has already altered the fundamental landscape. Furthermore, their is general acknowledgement that a monumental credit bubble has developed as a side effect of the monetary policy efforts employed to weather the 2008 crisis. Yet, complacency on both these fronts is easy to revert to given policy officials level of policy control, the lack of transparency in data and the indefinite time frame for which they eventually materialize. Beware turning a blind eye to China's contribution to risk aversion, however, as a new front of influence arises: speculative excess. And, unlike economic activity and the banking system, this is an area for which officials have limited control. We focus on incredible surge in Chinese capital markets and the risks from potential fall out in this weekend Strategy Video.
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