China: back to the future

Posted: November 24, 2014 in Uncategorized

China, after having tried -and failed – a number of unconventional stimulatory move – went back to the old school of cutting the interest rate.

Naturally the market cheered and probably this is the start of the Christmas rally.

Also they lifted the deposit rate cap limit which is a good move that goes towards liberalization .

The issue with the old school move is that it does not help clean the imbalances and problems of China. Actually reiterate them.

So again, in order to achieve the mystical 7.5% GDP growth they gave up a pretty good strategy to solve the Chinese economy issues.

Unfortunately, the issues will represents themselves in due time and not so far in the finish as all this stimuli have a clear pattern to have a decreased effect in time (a bit like taking the same medicine over time)

The road to hell is paved with gold. None the more appropriate. At least they tried (contrary to the West)


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