Well over a billion people celebrated a New Year in the past few weeks; we have officially commenced the Chinese Lunar Year. 2016 is considered the Year of the Monkey according to the Chinese calendar, this lunar calendar will bring bright prospects but in some ways, it will be quite a turbulent year and it will also be quite strenuous without much time to relax. Ironically, this sounds an awful lot like the stock market so far this year. In fact, some fortunetellers (which Chinese businessmen often rely upon for deals) are saying that the Chinese market will be extremely volatile in 2016.
In recent days, one of the most important gauges of manufacturing activity in the U.S. just came in at a 42-month low, and we already know that China’s economy only grew by 6.9% in the past year for the slowest rate in 25 years. Unfortunately, things are not looking good for 2016 either, with most economists saying that China’s gross domestic product (GDP) growth rate will only be about 6.5% for the year.
For some reference, here is what the GDP growth rate has been for China in recent years.
This is not to say that the country is not simply setting the bar low in order to really “surprise” investors with reports of new robust growth. However, I highly doubt this will be the case for them. We have already witnessed the country’s central bank injecting the market with more money in order to lower the value of its currency. This is done with the hope of attracting higher exports from other nations who currently have very strong currencies – namely, the United States. What they fail to see at the moment is just how bad they are making it for their own citizens.
China is focused too much on its steady stream of exports, while its own people are actually the largest consumer groups in the world. Weakening the Yuan is a big mistake in that citizens won’t be able to afford homes and cars – two items that the Chinese have slowly been able to afford in recent years. Optimizing its infrastructure and sustainability should be the main points of focus for China – not maintaining a stream of cheap products overseas. Perhaps the Year of the Monkey is the year they actually stop “monkeying around” with the long-term goals of the economy.
Greetings, GradMoney Readers!
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