China's journey from new normal to stock market crisis epicenter

By David Boddiger

“When the wind of change blows, some build walls while others build windmills.” In late January, Chinese Premier Li Keqiang shared that proverb with global leaders in a keynote speech at the World Economic Forum in Davos, Switzerland.

China was in windmill mode, committed to structural reform “no matter how difficult.” The “new normal” called for more moderate, consumer-led growth. The financial system would be modernized and the country aimed to shift away from its excessive reliance on debt-fueled, infrastructure-powered growth that had led to industrial overcapacity and an epic credit bubble.

Better still, the makeover would be pulled off smoothly: “What I want to emphasize is that regional or systemic financial crisis will not happen in China, and the Chinese economy will not head for a hard landing,” Li said. Roughly seven months later, China finds itself at the epicenter of a global stock market rout that has vaporized $8 trillion in wealth.

Nobody is quite sure whether the world’s No. 2 economy is really growing at 7 percent, as official figures suggest, or 6 percent — or actually careening toward a hard landing.

Authorities are now quietly rolling out China’s biggest stimulus effort since the 2008 global financial crisis in an … continue reading

Via:: Tico Times