It’s the lull before the Chinese New Year sleep. Famous last words, but we expect nothing much in the next two weeks in terms of Korea, stock markets, US-China confrontations or anything else as China goes back to the “old home” or settles down with a bowl of noodles and a warm screen.
This CNY finds China and Those in Command in a relatively positive place, largely due to the relative sense of chaos from across the Pacific. The RMB has strengthened solidly and consistently during the lunar year nearly over, but in these final days it has shown instability and could drift back down. Who knows. We take the view that the ultimate power rests in the long run with the market.
China’s economy overall has transitioned quite smoothly towards the future, although the fundamental elements that make it superficially smooth but potentially brittle are still there. Things are absolutely fine and stable until the day when suddenly they are not. Lack of transparency remains China’s Achilles Heel, and it’s always hard to conceive of something other than the status quo. But things have this habit of changing, for better or for worse. Except the Shanghai stock exchange, which dropped 4% on Friday and is within a whisker or where it was five years ago, two years ago, one year ago… It’s more stable than Bitcoin, though.
All the best for the year of the Dog.