- Published: 12 January 2016
- Written by Editor
The Disruptive Discoveries Journal by Chris Berry
If anything is clear after the start of 2016, the global economic rebalancing that central banks around the world are trying to engineer is not proceeding according to plan. The circuit breaker fiasco in the Chinese equity markets is the latest example giving investors pause with respect to what is truly “going on” in China. The Shanghai composite equity index has lost almost 15% of its value YTD and few see good reason for this slide to halt aside from intense government support and RMB devaluation. Money continues to flow out of China as we speak.
This drains China’s FX reserves – a tool the Chinese need to manage a weakening RMB, a headache with global repercussions. Additionally, it appears increasingly likely that the US Federal Reserve just raised short term rates into a weakening US economy (December jobs growth not withstanding). When the central banks of the world’s two largest economies are losing credibility, it’s no wonder financial turbulence has increased.
