Many pundits warn China’s debt woes doom it’s post-COVID recovery--and that of the world. They point to high-profile corporate defaults and downgrades cascading into a debt tsunami destined to reverberate globally—especially with China reducing stimulus. But that isn’t just wrong, it’s backwards. This very-manageable default increase demonstrates China’s recent commitment to liberalizing financial markets. It also signals a return to pre-pandemic normalcy awaiting the West—both broadly bullish worldwide.
Given Beijing’s recent Hong Kong crackdowns and extant Taiwan tensions, notions of China’s “liberalization” may seem deluded. Indeed, President Xi Jinping’s political moves spark strong emotions among investors. But these “foreign” policy issues are largely removed from financial markets—my limited area of expertise. Markets’ greater concern is Xi’s economic agenda. Here China is opening to free market forces more than ever.
Read Full Article »
