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China Suppresses Negative Economic News, Reducing Transparency and Hurting Investor Confidence

  • Chinese authorities suppress negative economic news and analysis, describing the economy as "stable with good momentum". This reduces transparency for investors.

  • Beijing stopped publishing youth unemployment data, reducing insight into the economy's true state. Authorities silence online discussion and external criticism.

  • Rejecting alternative economic views is counterproductive. China's one-child policy was maintained too long despite warnings.

  • Making the economy opaque spooks investors. Allowing open debate helps spot and fix problems.

  • As a superpower, China should show confidence and tolerate bad economic news. This helps avoid or manage crises.

scmp.com
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### Summary Growing concerns about global economic growth and uncertainties in monetary policy have led to turbulence in financial markets, with rising bond yields and a decline in equity markets. Key factors affecting growth include interest rates, bond yields, and access to funds, which may result in a credit crunch and a more risk-averse environment in capital markets. China's shift towards self-sufficiency, combined with a more prudent policy environment, slower population growth, and trade sanctions, will lead to slower and more erratic growth in the country. Although there are near-term concerns, the longer-term outlook for global growth remains positive. ### Facts - Global economic growth is a concern, reflected in rising bond yields and a decline in equity markets. - Policymakers, particularly in the US, are worried about overtightening monetary policy. - Western economies, including the UK, have proven resilient despite expectations of a recession. - Lower inflation will boost spending power, but growth will depend on where interest rates and bond yields settle. - Businesses face challenges in raising funds due to a credit crunch, tough lending conditions, and a risk-averse capital market environment. - The International Monetary Fund forecasts global growth to slow from 3.5% last year to 3% this year and next, with Asia being a major driver. - Concerns about deflation in China exist, but low inflation is more likely. - China's shift towards self-sufficiency in response to trade wars has coincided with a more prudent policy environment and the need to curb inflation and manage debt overhang. - A shrinking population and structural changes in China will result in slower and more erratic growth. - Private sector activity remains strong in Asia, and Japan's economy is experiencing an economic rebound. - Western economies previously experienced a prolonged period of cheap money, which led to imbalances and misallocation of capital. - Prudent monetary policy in some emerging economies provides more room to act in response to economic weakness. - Concerns exist regarding rising policy rates in the US, UK, and euro area and the tightening of central banks' balance sheets. - The definition of a risk-free asset is being questioned, as government bonds, previously considered safe, have witnessed negative total returns. - There has been a rise in shadow banking and non-bank financial institutions, with collateral in the form of government bonds playing a crucial role. Overall, the focus is shifting from inflation to growth, and future policy rates may need to settle at a high level. High levels of public and private debt globally limit policy maneuverability and expose individuals and firms to higher interest rates.
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