The canaries in the Chinese coalmine

Notwithstanding the upside surprise in the Chinese December trade data, Kate Mackenzie at FT Alphaville recently highlighted some SocGen analysis showing the dire effects of a hard landing in China (sub 6% growth). Here is the bottom line: World GDP: -1.5 per cent (0.3 per cent a direct effect of China’s slowdown and the remainder through transmission mechanisms outlined below) Trade partners: Taiwan: -4.5 per cent South Korea -2.5 per cent Malaysia: -2.5 per cent Australia: -1.2 per cent Japan: – 0.6 per cent Eurozone: -0.3 per cent US: -0.2 per cent The analysis postulated a 50% drop in base metals, Brent crude to bottom at about $75 and an abrupt drop for gold but a recovery thereafter. Trouble in shadow banking land In a separate post, Mackenzie wrote about on China's shadow banking system, which is fast becoming China's version of subprime mortgage market...