London–The phrase ‘China syndrome’ denotes the hypothetical meltdown of a nuclear reactor in which the hot atomic core burrows deep into the Earth. A version appears to be happening with China’s economic problems, in which the general Chinese downturn is burrowing into the world economy.
The signs are everywhere. Slower growth, leading to reduced purchases of commodities, which in turn cripples emerging countries that depend on such sales. Bad bank loans putting the country’s financial structure in danger. Massive capital flight that reflects a lack of confidence. A government that puts fingers in the dike of both stock market and currency collapses with improvised cash infusions and, in the case of the yuan, possible market regulation.
There are still voices that say China will weather the storm. The GDP growth continues to outpace most countries’ rate. Consumers are still buying. China has lots of cash reserves to prop up its currency. Cheap oil reduces industrial costs.
Still, there is worry and most of all, a lack of trust. This is because of the continuing opaque nature of Chinese decision-making, as well as little confidence in official statistics. People don’t know hat’s coming next.
So the Chinese, patriotic in word but wary about what’s in their pocketbooks, are pulling money out. Not a good sign, unless you are selling real estate in London, where many wealthy Chinese have traditionally liked to park their money. But a luxury real estate selloff there is not out of the question. Expect the meltdown of China’s hot core to keep seeping into economies worldwide.
IMF and Chinese ‘headwinds.’
Currency outflow is speculators’ fault, China bank head says.
Brookings Institute says Beijing is too slow in making needed reforms.