http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle Is This the Death of the Chinese Economic Miracle? The Chinese are letting their currency devaluate in an attempt to revive a slowing economy. We wonder if this is the death of the Chinese economic miracle. The Wall Street Journal reports that U.S. stocks are sharply lower after the Chinese currency move. U.S. stock indexes slid Tuesday after China’s devaluation of its currency signaled growing worry about slow growth from one of the world’s biggest importers of raw materials. The onshore yuan on Tuesday posted its biggest one-day loss in two decades. A weaker yuan could hurt the competitiveness of firms outside China by making their goods and services relatively more expensive, while companies that generate sales in China could find revenue generated in yuan is worth less in their home currency. The bosses of the managed capitalism economy have often seemed infallible as cheap labor attracted foreign investment and produced cheap and profitable exports for decades. However, we have often compared China to Japan of the 1980’s when the Japanese seemed ready to take over the world. A glut of hidden debt took down the Japanese economy and sent it into two decades of deflation. If this is the death of the Chinese economic miracle hidden debt may be the culprit for China as it was for Japan. Chinese Debt Many people know that China holds a few trillion in hard currency reserves. However, many businesses in China have debts denominated in U.S. dollars and not yuan. The Financial Times reports that China’s dollar debts come under pressure as the yuan devaluated.

1. IS THIS THE DEATH OF THE CHINESE
ECONOMIC MIRACLE?
By www.ProfitableInvestingTips.com

2. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The Chinese are letting their
currency devaluate in an attempt to
revive a slowing economy.

3. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
We wonder if this is the death of the
Chinese economic miracle.

4. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
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5. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The Wall Street Journal reports
that U.S. stocks are sharply
lower after the Chinese currency
move.

6. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
U.S. stock indexes slid Tuesday after
China’s devaluation of its currency
signaled growing worry about slow
growth from one of the world’s
biggest importers of raw materials.

7. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The onshore yuan on Tuesday
posted its biggest one-day loss in
two decades.

8. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
A weaker yuan could hurt the
competitiveness of firms outside
China by making their goods and
services relatively more expensive,
while companies that generate sales
in China could find revenue
generated in yuan is worth less in
their home currency.

9. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The bosses of the managed
capitalism economy have often
seemed infallible as cheap labor
attracted foreign investment and
produced cheap and profitable
exports for decades.

10. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
However, we have often compared
China to Japan of the 1980’s when
the Japanese seemed ready to take
over the world.

11. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
A glut of hidden debt took down the
Japanese economy and sent it into
two decades of deflation.

12. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
If this is the death of the Chinese
economic miracle hidden debt may
be the culprit for China as it was for
Japan.

13. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
Chinese Debt

14. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
Many people know that China holds
a few trillion in hard currency
reserves.

15. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
However, many businesses in China
have debts denominated in U.S.
dollars and not yuan.

16. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The Financial Times reports that
China’s dollar debts come under
pressure as the yuan devaluated.

17. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
China’s surprise devaluation of the
renminbi has stunned markets and
stands to escalate a regional
currency war.

18. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
Further, while a weaker currency is
seen helping bolster China’s sagging
economy, any macro benefits must
be weighed against costs.

19. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
These mainly fall on those domestic
companies and banks that have
dollar-denominated debt and face
the prospect of paying them back via
a weakening renminbi.

20. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
Among the broader market
implications looms further downward
pressure on commodity prices and
on blue-chip equities in the
developed world, as multinational
companies face the prospect of
slowing demand from China and a
firmer US dollar.

21. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
A big and more immediate risk,
however, is that investors and other
emerging market countries will
expect further weakness in China’s
currency.

22. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
It also remains to be seen whether
the higher debt servicing costs for
Chinese companies and banks that
have borrowed dollars sparks a
massive unwind of such loans,
pushing the dollar sharply higher.

23. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
If this downward slide of the yuan
accelerates it could we spell the
death of the Chinese economic
miracle.

24. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
What Is the End Result?

25. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
When a country is in trouble and
takes steps to devalue its currency it
can become a self-fulfilling prophecy
as the market expect repeated
devaluations and drives the currency
down.

26. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The world is seeing a Forex world of
competitive devaluations.

27. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The end result of the yuan
devaluations could be an
accelerated Forex race to the bottom
which China will not necessarily win.

28. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The problem for China is that it
needs to build up local consumption
and not rely on exports for continual
growth.

29. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
MarketWatch says that this
move ramps up the risks for
investors and the Chinese economy.

30. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The fault line in China’s struggling
economy has just extended from its
equity to its currency markets.

31. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
With all eyes focused on Beijing’s
epic, state-orchestrated stock-
support program, the central bank on
Tuesday surprised markets with an
almost 2% devaluation of the yuan,
the largest since 1994.

32. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
Investors now need to assess
whether China is ready to embark on
a new yuan weakening cycle.

33. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
While this may boost exports and
give the economy a lift, it is also a
potentially hazardous path as
authorities juggle potential capital
flight and corporates holding
substantial foreign currency debt.

34. http://profitableinvestingtips.com/stock-investing-tips/is-this-the-death-of-the-chinese-economic-miracle
The flight of capital out of China may
accelerate and seal the death of the
Chinese economic miracle.