Economic Hard Landing In China


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Economic Hard Landing In China

Will an economic hard landing in China take the Yuan down with it? China’s economy has outpaced the world for the last thirty years. After China opened itself to the West and instituted market based economic reforms in 1978 its “managed capitalism” and cheap labor attracted foreign investment. China proceeded to copy what it learned as well. With growth rates commonly in the ten percent per year range China has accumulated currency reserves of over $3 Trillion, mostly in US dollars. However, as China’s economy becomes increasingly integrated with the rest of the world it also has become more dependent on the other economies of the world. The Great Recession that started in 2008 has caused serious economic havoc in the markets that China needs most, North America and Europe. As the Euro Zone has worked to forestall a Greek debt default it instituted austerity measures that are expected to bring on a recession this year. The cumulative effects of fewer imports to Europe and an overpriced real estate market at home may well bring about an economic hard landing in China.

The Yuan Has Cooled Off

As the Chinese economy grew the Yuan tended to rise in value. However, Chinese currency controls kept the Yuan at a lower price which served to keep Chinese goods competitively priced. As the economic pain worsened in North America, Europe, and elsewhere the pressure increased on China to let the Yuan float to a market level. Now, as the controls on the Yuan have been relaxed there is a risk of an economic hard landing in China. As such it is not impossible to imagine the Chinese Yuan falling in value if allowed to truly float versus the US dollar, Euro, Pound, and the rest. A harbinger of things to come is the Chinese stock market which has lost ten percent of its value in the last month and half of that in just a few days. If the Chinese stock market continues to head South and the long awaited Chinese real estate crash happens the economic hard landing in China could well drag down the Yuan with effects felt around the world.

Measures to Prevent an Economic Hard Landing in China

If things get tough China might take a page from the US Federal Reserve playbook. Buy bonds with printed money to lower interest rates to the minimum. This would stimulate industry and the Chinese economy. China might pursue more infrastructure projects and incur more national debt, eating away at its $3 Trillion in reserves. A substantially lower rate of interest on the Yuan could serve to reduce its price in the Forex market. In the meantime traders might just get used to the need to trade a declining Yuan instead of a rising and or manipulated Yuan. As always we are not suggesting that Forex traders trade the Chinese currency or that they ignore it.

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Economic Hard Landing In China

  1. 1. Economic Hard Landing in China
  2. 2. To see a complete version of thispresentation and to obtain our free EBookfollow this link: the Forex Conspiracy Report forinsights into trading foreign currencies.Get your copy at
  3. 3. Will an economic hardlanding in China takethe Yuan down with it?China’s economy hasoutpaced the world forthe last thirty
  4. 4. After China opened itself to theWest and instituted marketbased economic reforms in1978 its “managed capitalism”and cheap labor attractedforeign
  5. 5. China proceeded to copy whatit learned as well.With growth rates commonly inthe ten percent per year rangeChina has accumulatedcurrency reserves of over $3Trillion, mostly in US
  6. 6. However, as China’s economybecomes increasinglyintegrated with the rest of theworld it also has become moredependent on the othereconomies of the
  7. 7. The Great Recession thatstarted in 2008 has causedserious economic havoc in themarkets that China needsmost, North America
  8. 8. As the Euro Zone has workedto forestall a Greek debtdefault it instituted austeritymeasures that are expectedto bring on a recession
  9. 9. The cumulative effects offewer imports to Europe andan overpriced real estatemarket at home may wellbring about an economic hardlanding in
  10. 10. The Yuan Has Cooled
  11. 11. As the Chinese economy grewthe Yuan tended to rise in value.However, Chinese currencycontrols kept the Yuan at alower price which served to keepChinese goods
  12. 12. As the economic painworsened in North America,Europe, and elsewhere thepressure increased on China tolet the Yuan float to a
  13. 13. Now, as the controls on theYuan have been relaxed thereis a risk of an economic hardlanding in
  14. 14. As such it is not impossible toimagine the Chinese Yuanfalling in value if allowed totruly float versus the US dollar,Euro, Pound, and the
  15. 15. A harbinger of things to comeis the Chinese stock marketwhich has lost ten percent ofits value in the last monthand half of that in just a
  16. 16. If the Chinese stock marketcontinues to head South andthe long awaited Chinese realestate crash happens theeconomic hard landing inChina could well drag downthe Yuan with effects feltaround the
  17. 17. Measures to Prevent anEconomic Hard Landing in China
  18. 18. If things get tough Chinamight take a page from theUS Federal Reserve playbook.Buy bonds with printedmoney to lower interest ratesto the
  19. 19. This would stimulate industryand the Chinese economy.China might pursue moreinfrastructure projects and incurmore national debt, eating awayat its $3 Trillion in
  20. 20. A substantially lower rate ofinterest on the Yuan could serveto reduce its price in the
  21. 21. In the meantime traders mightjust get used to the need totrade a declining Yuan insteadof a rising and or
  22. 22. As always we are notsuggesting that Forex traderstrade the Chinese currency orthat they ignore
  23. 23. Rather we offer a view of apossible economic hard landingin China for those interested inpursuing the subject further insearch of trading
  24. 24. For more insights and usefulinformation regarding the Forexmarkets and foreign currencytrading, visit
  25. 25.