Jan 14 Just how worried should the commodity sector be about China? On the surface the answer would appear to be very worried indeed, given the multitude of issues confronting the world’s second-largest economy, coupled with rising concerns about the rest of the world.
The 16 percent drop in the Shanghai Composite Index since the start of 2016 up to Wednesday’s close is the headline act in a wall of worry over the Chinese economy.
To equity weakness, add in concern about yuan devaluation, reform of state-owned enterprises, a slowing and less globally competitive industrial sector, the limitations of monetary policy easing and bad debts at regional and local government level.
The threat of the yuan dropping more than 10 percent to above 7 to the dollar and concern that there will be little progress in restructuring zombie state-owned companies in the mining, steel, aluminium and industrial sectors were the top two concerns among investors at the UBS Greater China Conference this week in Shanghai.
Put simply, the Chinese authorities are trying to deal with a range of simultaneous challenges, something that would probably be beyond the capability of most governments.
For the rest of this article, click here: http://www.reuters.com/article/column-russell-china-commodities-idUSL3N14Y08N20160114