China, the world's fastest-growing economy stands for a new problem due to the bad health of global economy.
China's central bank unexpectedly ordered banks to increase the amount of reserves they hold by 0.5%, in order to temper the lending boom. The amount of loans keeps on rising. January saw more new loans granted than in the previous three months combined.
The authorities are worried about overheating.
It is no surprise that the government of china had to step in and this because of the rising inflationary pressures.
Edward Hadas, Assistant Editor at Breakingviews, says that the authorities have an unenviable task to fulfill. They need to keep growth above about 8% and job creation steady so as to avoid social unrest.
But it’s possible that this problem could be solved by the significant jump in Chinese consumption. China is exporting more and more to the Western consumers.
The gradual slowdown on the cards for this year is one key reason why commodities are vulnerable to solve this problem.
However not everybody thinks that the demand in Chinese commodities will stabilize the situation. “Capital Economics” and “The Economist”, say that the Chinese demand will slow down.
Whether or not China can ultimately avoid a nasty crash stays a mystery for now.
I personally think that China will solve this problem, like they solved many others. The growth in Chinese commodities should easily avoid the crash. More consumption means more jobs and this should stabilize the demand for loans.
Bram Verstraete
Good work, Bram!
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