The great China slowdown
China cut its interest rates for the sixth time in less than a year as the economy grew by 6.9% in the September 2015 Quarter, its lowest growth rate in 25 years. As consumption rises in importance – last year services accounted for 48.2% of output – observers are shifting their focus from electricity demand to shopping. September saw a 10.9% annual increase in retail sales, the fastest pace this year. China’s reduction to record-low rates and anticipated stimulus in Europe and Japan add to monetary policy divergence with the U.S., where the Fed is considering its first rate increase in nine years. Surging debt in China combined with property over-investment were ignored by local governments, which have limited tax powers, and so rely on land sales; and this generally leads to more property development. Meanwhile, we question whether China will pursue further renminbi devaluation in an attempt to reflate its economy – China will be selling things more cheaply in US Dollar terms, which is bad for its competitors, particularly those from emerging economies. READ THE FULL ARTICLE: (VIEW LINK)
Roger Montgomery founded Montgomery Investment Management, www.montinvest.com in 2010. Roger brings more than two decades of investment, financial market experience and knowledge. Roger also authored the best-selling investment book, Value.able.