Reasons why China may
take time to return to growth:
- China's factory sector seemed to decline in September, falling to its weakest level in 6-1/2 years as domestic and export demand continued to slump.
- Devaluing its currency to boost exports seems to be a quick fix aimed at seeking exports rather than a domestic market.
- Extent of systemic bad loans
- Not too transparent investments in the Chinese banking,
- A worrying "shadow banking" system.
- Inflation and re-inflation of asset bubbles.
- Firms engaged in illegal businesses,
- Identity fraud, a typical practice in grey-market margin financing.
- Leverage in equity.
- Real estate at inflated prices, and this asset used as collateral for buying stocks at inflated prices.
- People's Bank of China had cut liquidity ratios and interest rate and offered a credit line for equity investments.
- Routes for sellers on stock markets have since been blocked.
- As many as 1,500 listed companies have "voluntarily" withdrawn their shares from being traded.
- Since 2000, China has had the world's largest outflow of high net worth individuals. Several thousand wealthy Chinese have reportedly sought second citizenship fuelling demand to buy foreign property. These high net worth individuals, defined as those with net assets of $1 million or more excluding their primary residences, are moving to the U.S., Hong Kong, Singapore Britain, Australia and Canada . Australia's falling currency and proximity are attractions.
Note: This blog's views are an academic expression of views without any risk and responsibility. The blog makes no recommendations for investment
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