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China's liquidity crunch, and what it means for everyone | FT Alphaville

At the moment, the most likely end game of all of this is more realisation of misdirected investments that have resulted from the vast wave of credit growth over the past few years (which has in turn taken the place of export growth as China's primary key of growth).

Recognising the misallocation -- or being forced to recognise it -- would in turn imply a steeper growth slowdown. Just look at how the sub-8 per cent growth has shaken global confidence. Nomura are now putting a 30 per cent chance of sub-7 per cent growth in H2.

Here's another thought. Stevenson-Yang, who closely watches the amazingly rapid innovations in China's shadow finance world, sees a risk that China's feted huge foreign capital reserves could dry up.

That would be a shock.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jun 24th, 2013 at 07:40:08 AM EST

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