Back in January, I made the prediction that China will strengthen its currency as part of its strategy to displace the US as the world's dominant power. I further predicted that this would lead to a financial crash in China, and that this would spread to the rest of the world. The end result will be a stronger Chinese currency, and a relative advantage to China.
More recently, we've seen China use flu outbreaks as excuses to shut down exports whenever they find this convenient. Policies are put into place for an all out economic war. However, the Chinese currency is only up by about 1% relative to the US dollar. Apart from the flu itself and the increased control on exports, China appears hesitant. But that may soon change. There's a grey rhino roaming around in China's financial markets, and if it's left unchecked we're likely to see tremendous damage to financial assets throughout the world.
Evergrande is a Chinese investment company in urgent need of $300 billion dollars. This money isn't going to come from private investors, so it's up to the Chinese government to decide its fate. What China chooses to do in this case will determine the global financial climate going forward. If they let it go bankrupt, there will be knock on effects all over the place. If they save it, things will remain calm until some other event stirs the pot.
China is once again in a position to determine world events going forward. With the stage set for China to give the world another blow, I suspect they will let the company go bankrupt and take advantage of the chaos that follows to further strengthen their grip on the world.
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| Xi Jinping |
By Palácio do Planalto - https://www.flickr.com/photos/palaciodoplanalto/47945730807/, CC BY 2.0, Link
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