Why China won't blow up the world (this year)

I had a response to my last blog post in which I indicated that the contagion effects from a China slowdown had been contained (see Bottomed, but wait for a re-test of the lows). A reader pointed to comments by Worth Wray worried aloud about the possible catastrophic of a RMB devaluation. While I had initially dismissed Wray as a permabear, the combination of these concerns and a report of further weakness from China's Manufacturing PMI meant that these concerns deserve a more complete and detailed answer.

Let me be clear. I don't deny that China faces many problems because of its stalling economic growth rate. Despite all of the hand wringing by western observers, however, Beijing has many tools at its disposal to mitigate the immediate downside risks facing China and the global economy. The China growth story will probably not end well, but it will not end today.

The full post is at our new site here.



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