Macroscope | China's devaluation pointing to another world economic crisis
Beijing's currency move adds to signs of global downturn as euro zone stagnates, emerging markets tumble and commodity prices decline
China's currency devaluation is not the end of the matter. And nor its recent stock market mayhem. They are clear symptoms of a deeply troubled world economy, and investors need to wake up to the risk that market jitters will get a lot more serious in coming months.
Another global economic crisis looms and there are no circuit breakers left to stop it.
World policymakers have run out of conventional remedies and quantitative easing infusions are having less effect. If China is a barometer of heavy weather ahead, then welcome to the bear market.
China is clearly feeling the pinch as leading economic indicators show a steep decline. As a global export powerhouse, it is feeling early warning signs of a global downturn. Exports have fallen 8.3 per cent year on year, no surprise considering world trade is languishing 13.6 per cent lower than a year ago.
Global economic confidence has been heavily sideswiped by a number of adverse factors. The impending US rate tightening, Greek debt crisis, trade sanctions on Russia and rising tensions in the Middle East have all hurt growth prospects. Worries about a slowdown in China simply add to the gloom.
Set against such an uncertain backdrop, it is no surprise companies are less inclined to invest, while consumer spending intentions are under a cloud.