The Bigger They Are, The More They Bleed – China’s Economic Meltdown

According to various reports by alternative, non-corporate owned media and leading senior economists across the globe, it is very possible that soon China’s economy “could be heading towards the biggest financial disaster since the 1929 Wall Street crash”. Shares on China’s stock markets plummeted by 30% in less than a month, and more than $3.2 trillion has been lost in around 3 weeks. If one were to illustrate just how bad this is, the amount of money lost in China’s stock markets is 10 times the size of the entire Greek economy.

According to Andrew Kenningham, a Senior Global Economist at Capital Economics (one of the leading, independent economy research companies in the world – based in London), this sudden financial meltdown was mostly caused by a huge bubble in the market in the middle of last year – in layman’s terms, the Chinese government was encouraging people to buy up (in this case, one too many) stocks in order to flex its economical and political muscle against competitor economies. To elaborate on this analogy, China ‘flexed its muscle’ too much and basically tore it and caused it to bleed internally.

Mr Kenningham also went further, stating that “every individual investor has to take responsibility for their own actions and a lot of people perhaps got their fingers burnt who would have otherwise been wiser to not get involved”. In the interest of credibility in this article, let us also mention that Al-Jazeera English (the station on which Mr Kenningham was speaking about China’s economy  – link here) is not the only news station to mention China’s weakening economy. According to Times of Malta, “China grew at its slowest pace in six years at the start of 2015 and weakness in key sectors suggested the world’s second-largest economy was still losing momentum, intensifying Beijing’s struggle to find the right policy mix to shore up activity.”

To the Maltese people reading this article and wondering why they should care about this, please – allow me to explain. Right now, our country is cutting all sorts of deals with the Chinese; MOUs (Memorandum of Understanding) on intellectual property, a possible partnership between Air Malta and the Chinese government and not to mention the situation concerning Shanghai Electric and our terribly mismanaged energy sector. Most of us believe that the hundreds of millions of Euros that China is pumping into our country are all unquestionably brilliant investments brought to us by our infallible government, but in reality it’s closer to a naïve bunch of amateurs selling off bits and pieces of the country to the professionals in the hopes of joining “the big leagues” of the global economy.

By no means do I consider myself an expert on economics (at most I went to a couple of lectures at University when I felt like it but that’s about it), but it is quite clear that our government’s taking a very big risk by doing business with an unstable, emerging superpower with a household debt of $28 trillion (282% of China’s GDP). After all, China’s history of being against political freedom, censorship of information, harsh taxes on the poor as well as their atrocious human rights record (violations include detentions without trials, forced abortions and confessions and torture) do not bode well. If all that has been said in this article has not somehow set off a few alarm bells in your brain, I don’t know what will.

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