Market Comment LOOKING AHEAD
China China has been an important driver in the global recovery following the financial crisis that started in 2008. Their economy continues to expand while other countries falter. China is a major purchaser of commodities, especially copper and iron ore that are used in industrial production. That buying helped many developing countries weather the financial crisis. In addition to commodities, China buys US Treasury debt and currently holds in excess of $1T. China’s economy weakened sharply in the first two months of 2014 causing concern that the weakness may continue. The slowdown is broad-based including manufacturing, housing and investment. China’s Premier Li Keqiang recently warned lenders to expect high levels of defaults from loans made to factories and to expect “serious challenges” in the years ahead. The Chinese economy grew 7.7% last year, sharply higher than any other large economy. However, the fear that growth will slow causing the government to act is growing. China’s concern is employment. A dramatic increase in unemployment could cause civil unrest, something no government wants to face. China is a major trading partner with many economies. A dramatic slowdown in growth, or worse, a housing or credit bust would be felt around the world. To unsubscribe, please hit “reply” and include unsubscribe in the subject line.
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