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The Dragon wall is Shaking

In the past few weeks, there have been various announcements by the Chinese government for infusing funds at various levels to boost consumption at consumer and corporate levels but for now, the needle keeps on dragging lower.

A few months back the only issue the country faced was related to the property sector. Then it was the crackdown on the technology sector impacting billions in investment. And then came the major impact of the Covid zero policy that resulted in major shutdowns and growth worries. After so many months all these are still ongoing issues.

In addition, the new issues have raised the worry of billions in terms of the way ahead. The geopolitical issue relating to Taiwan has taken up a few notches that would bring new uncertainty for a few years at least. Another issue is driven by nature and the result of it is that the country is facing the worst drought situation in many regions. And some of these regions are large manufacturing hubs.

All these issues have made the government and investors worry more than usual. It has also resulted in flat or negative returns in equities and other assets. On the government front, they have been selling US bonds since the start of the year bringing down the holding by $100Bn which is almost 10% down.

There is a need for a stimulus that provides much-needed support to these walls of worries but it needs to have a quick impact otherwise it might bring inflation much higher and growth lower.

Despite all the issues, it must be remembered that any impact within China sends a spiral impact throughout the world. So any reaction on the extreme ends will not pleasant for the fragile global economy.


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