China In Your Hands

 

In all the excitement / anxious concern / farcical comedy / bewilderment (delete as appropriate) in the EU Referendum aftermath, Donald Trump Presidential Stage Show and the Sam Allardyce 'sting', we have taken our eye off the ball with China.

 

Forget the endless debating on whether you can justify putting the heating on (is it Autumn yet or still Summer?), the merits of what will be left of the Great British Bake Off post Channel 4 transfer, whether ‘Strictly’ is as good as it used to be and how has the very unelectable Jeremy Corbyn got elected as the Labour leader for just one moment……and let’s consider China as we really haven’t shown them the attention they deserve recently.

 

First things first, China is a big deal in world economic terms. They are the second largest economy in the world and will be the biggest over the next 10 years (give or take a few years).

 

However, there are some big concerns as their economic growth has been fuelled by credit and these things don't go on forever. Just look at our own banking ‘readjustment’ in 2008 / 2009.

 

Ken Rogoff  (the former chief economist of the International Monetary Fund) summed things up perfectly recently when he said “a slowdown in China is the greatest threat to the global economy” and a “hard landing for one of the main engines of global growth could not be ruled out”.  

 

The biggest issue is the increasing fear that China's economic boom was based on an unstable credit bubble. Enter UK Banks from stage left……

 

UK banks have $530bn worth of lending and business in China…...that is about 16% of all foreign assets held by UK banks.

 

This will play out for quite some time……let’s hope it unwinds nice and orderly (for once!).