The Asian market has soared, as Chinese investors begin to cash out on their stock market earnings and buy back stocks they don’t need to buy back.
Market researcher CB Insights has calculated that this has created a surge in Asian stocks and has sent Asian equity indexes soaring over the past month.
CB Insight’s market research suggests that in December, the Asian equities market was up nearly 10 percent year-on-year.
In December, China’s market capitalisation of over $1.4 trillion (about £1.3 trillion) was more than double the amount of the European Union’s combined GDP, according to CB Insensors analysis.
But what has really made the Asian equity market soar in value has been China’s decision to devalue its currency, the renminbi, in the wake of a massive economic slowdown.
It has done so by slashing the value of its currency against the dollar and pushing it to more than 40 percent below its peak of almost 200 percent in November.
“A year ago, China was facing severe economic problems,” says CB Insignia analyst David McVitie.
“So what China decided to do was devalue the renmo [the Chinese currency] against the U.S. dollar by 25 percent.
This effectively took out most of the Chinese economy and made it harder for them to make payments to the Chinese banks and other foreign creditors.
China’s government has also been pushing to cut its public sector deficit, which means a lot of people are now struggling to make ends meet.”
China’s government is expected to announce next week a massive stimulus package that will be worth more than $200 billion (about $320 billion) and will be funded by a new government bond offering that will give China’s people more income to spend.
But China’s devaluation has meant that there is little for the rest of the world to buy.
“In the short term, the Chinese government is now looking to raise its foreign exchange reserves and make its foreign debt repayments cheaper,” says McVinie.
But this is only the beginning.
In 2018, the government is set to announce a $1 trillion (£1.8 trillion) national budget, which will be used to fund infrastructure projects in the coming years, which could further exacerbate the country’s economic woes.
In the meantime, China has also increased its military spending, which is forecast to reach $3 trillion by 2020.
This is largely due to its increased presence in the Pacific and is likely to have the biggest impact on the Asian markets.
The Asian markets have soared in value because of this.
China has been building up its military power and is now able to act more flexibly.
The country is also building up an economy that is capable of sustaining its growth and creating jobs.
But it also needs to diversify its economy away from oil and coal to energy.
“It’s hard to think of a country in the world that’s facing such a big challenge and has such a huge potential,” says Mark Glynn, senior market strategist at CB Insures.
“China is clearly one of those.”
China has the potential to become a major global player in the future.
It could help to create jobs, boost growth and create new opportunities for the Asian economy.
China is also one of the few economies that is willing to take on the global economic giants, like the United States, and has the ability to challenge them.
“China is one of a number of economies that has shown the ability and ability to diversifying its economy, so I think that is really going to be a big part of China’s economic growth going forward,” says Glynn.
In other words, China is going to continue to grow and it’s going to become an economic powerhouse in the years to come.
And China is definitely going to dominate the Asian economies.