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Macro Minute: Week of September 4, 2023

Today I want to cover a subject that can be controversial, China. I am only going to be looking at it from an economic and investment risk perspective. I have been asked if China’s economic weakness is something to be concerned about. It definitely has gotten media coverage with back-to-back Economist covers.

It is true that China’s economy has disappointed since they have reopened from Covid lockdowns and certain parts of the populace have struggled with employment. We also know that their housing construction got overleveraged and the construction companies have been failing for years. Like every economy that grows very fast, the transition into a more stable economic growth will have some casualties. Let us not ignore that China has had negative headlines many times before.

While I take these concerns seriously, I tend to look to experts with knowledge of managing these risks from an investment point of view. To that end, I recently read Louis Vincent Gave’s latest piece here. In it, he walks through how capitol markets have responded now compared to past economic and market crashes. To sum it up as succinctly as I can, he believes that bank share prices will collapse before a huge market crash caused by the financial system.

So, while there are concerns within China that merit watching, as of now it does not appear that the next financial market collapse is upon us.


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