Debt worries


Market observers have been pointing to the accumulation of China’s debt for some time now. Rines and Haley also talked about the risks that such a development entails for the country and on a global level:

“Eight years of expansive fiscal policy have pushed China into an enormous mountain of debt. China’s debt ratio is currently 225% (Debt/GDP). China owns corporate bonds with a default risk of 2.4tn US dollars.”

Rines also said “if the Brexit slows down the European economy, trade with China will also stall, which in turn would mean new debt for China”.

“That would be a shock not only to China but to the Bitcoin trader,” Haley said

Chen Zhao, co-director of Brandywine Bitcoin trader Global says the political reactions were “quick and determined”. While some economists warn against China’s growing debt burden, Zhao says concerns about China’s debt and the risks associated with it are exaggerated and fuelled.

Zhao says that debt in developing countries arises primarily from the need to convert savings into investments. Since China has a very high savings rate, such leverage is inevitable, Zhao says.

Potential shift of the crypto trader

While legitimate efforts to resolve the crypto trader situation can lead to a fundamental change in policy, the Brexit could lead to a fundamental departure from the crypto trader globalization we have been living for 30 years.

If such a change were to occur, it would have a major impact on China, which has benefited enormously from globalisation to date.

Further headwinds in the big economy paired with growing uncertainty and a drift away from globalisation could also provide strong backwinds for the Bitcoin course in the future.

Haley:

“Economically speaking and in view of the brexit, China has lost a strong supporter in the European free trade zone. Investments in the UK are now becoming less attractive for Chian. They granted the country access to the free trade zone. Probably some investments will now be put on hold.”

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