Implode-o-Meter News - China's August scare is a false alarm as fiscal crunch fades

Jens Nordvig from Nomura says China has $3.65 trillion reserves to cover foreign currency debts of $1.135 trillion, a ratio of 322pc. This a far cry from the East Asia Crisis in 1997-1998 when the ratio was 59pc in Malaysia, 33pc in Thailand, 27pc in Indonesia, and 22pc in Korea. All these countries had current account deficits. China most emphatically does not.
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Wisely or not - depending on your economic religion - the Communist Party has now reverted to stimulus as usual. The local governments issued almost $200bn of bonds over the two months of July and August. Beijing coyly describes its fiscal spending as "proactive". Turbo-charged would be another way of putting it.
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The property crash is already a memory. House prices have risen for three months. Sales were up 18.9pc in July. This matters more than anything happening on the Shanghai stock market... "The authorities may soon be forced to cool the property market again. Otherwise they risk another destabilising asset bubble," said Sian Fenner from Oxford Economics.
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At the risk of sticking my neck out, I think that Gothic warnings of a Chinese collapse this year will look silly by Christmas. The reckoning has been delayed again.
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True, Chinese exports are languishing, though over half of the 8.3pc fall in exports in July was due to base effects. Yet the "trade intensity" of China's economy is plummeting as the country moves beyond export-led catch-up growth. World bank data shows that exports peaked in 2006 at 36pc of GDP. They fell to 22.6pc last year. China is becoming a fortress economy like the US, moving to its own internal rythm. This is unpleasant for countries like Brazil that make a living supplying China with raw materials, but not for China itself.

Relevant:

China's August scare is a false alarm as fiscal crunch fades - Ambrose Evans-Pritchard