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If China Sneezes Will the Rest of the World Catch a Cold?

By Brad Lamensdorf and John Del Vecchio

Growth rates in China are slowing, which could have implications for the world economy. Like government statistics in the U.S., one must take the officially reported figures with a grain of salt. The fact that they’re in the doldrums suggests that the true, sustainable, economic picture is much worse than what we see on the surface. GDP growth has plummeted from several years ago and flattened out since 2015.

To be sure, 6.7% growth is impressive but far less than the heady days of 8-10% plus. Just like GDP, industrial production has imploded and flat-lined.

Retail sales are trending down and came in below consensus.

Finally, the pace of fixed asset investment has slowed rapidly. The steepness of the decline resembles a double black diamond ski slope.

There’s an old saying that if the U.S. economy sneezes the rest of the world might catch a cold. But, the world is a smaller place today. It’s flatter. Other economies matter more than at any other time in modern history. Emerging markets have been under pressure. Emerging market currencies have become unglued. Now one of the major economies in the world is slowing sharply at a time when expectations of U.S. GDP growth of 4% are completely unrealistic (non-made up numbers).

The clues to impending turbulence keep adding up…

John Del Vecchio

About John Del Vecchio Author of Rule of 72: How to Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio, John is a forensic accountant at heart. Standing on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, he built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around. John graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.

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