Wrestling With a Lack of Liquidity
Saxo Bank / Daily Forex Fundamentals / May 18, 2011
The Chinese slow-down factor
The key conclusion from my Asian visit last week was that Asia has reached peak growth. This entails refocusing on social dimensions and a wish to engineer a soft-landing. I’m confident that China will avoid a hard landing but more skeptical than consensus on how China will fair in terms of growth in the second half of 2011 and in 2012. Inflation will continue higher, precisely because China is currently witnessing peak growth and hence production capacity levels are at extremes where the pool of cheap labour has almost been exhausted and electricity and energy resources overall are at a maximum price level.
China hasn't stopped slowing down.
Economists Predict At Least One More Rate Hike
Liu Li / WSJ blogs / May 18, 2011
China ‘s long-running campaign to tighten monetary policy may have a little more life in it with economists expecting the People’s Bank of China will raise interest rates at least one more time this year, a survey of economists by Dow Jones Newswires showed Wednesday.
Every time the do another rate hike the the Yuan strengthens toward the value of the Dollar. This makes cheap Chinese exports less cheap and therefore reduces the demand for them.
Plus the Chinese Housing Bubble Popped.
China Economic 'Facade' Starts to Show Cracks: Chanos
By: Jeff Cox / CNBC / May 18, 2011
Though the nation has been looked on as a key driver of global economic growth, Chanos for months has been sounding warning signals about China and the precarious nature of its economic surge. He said a recent visit by members of his investment team found a slowdown in housing sales as well as a decline in prices.
"The cracks are spreading in the facade," he said. "You're seeing real estate firms shutter, sales offices closed down. Some of the engine behind the boom is at least beginning to sputter."