China is leaving the Party

Posted on: January 21, 2010 in: Uncategorized with 0 comments

That’s Global Liquidity Party, not the Communist Party, before you get too excited.

The other day, China told its banks to stop lending and that sent equity markets around the globe plunging.

Chinese demand has propped up prices for commodities in Canada, Brazil, Australia and Russia. If China leaves, commodity prices everywhere will fall.

China made the move because it is worried about inflation at home. China unveiled a huge stimulus program in response to the economic crisis. The Chinese economy grew at an impressive pace as a result but now get ready for the hangover.

Its too early to say just yet but this could be the start of another serious down-swing in the equity markets.

Below is a Wall Street Journal video in which their Asia correspondent (who looks like he could be my brother but really isn’t) explains more.

All the best,
Vikash

Leave a Reply

Your email address will not be published. Required fields are marked *

site by Carbonated Interactive