Sept. 30, 2015: International Monetary Fund Director Christine Lagarde at the IMF-World Bank annual meeting; she said the global economy is approaching a ‘new mediocre’ scenario of sustained slow growth (source: dpa)

After Fed delay, investors consider Chinese elephant in the room

Financial markets did not react well to the Federal Reserve’s decision in September to keep interest rates stable. Presumably, investors were worried that China’s slowdown is more serious than anticipated, and that the Fed has well-founded concerns about the outlook for the American and European economies.

<i>While the Chinese economy’s gradual deceleration is indeed problematic, its consequences pale in comparison with what could happen if frustration and disappointment led to a systemic crisis in that country. The advent of a new populist or military leadership in Beijing could be the signal for a worldwide market crash. The possibility of a Chinese political shock will loom ...

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Professor Enrico Colombatto
While the broad direction of economic developments in Russia, Africa and parts of Latin America is predictable, with the uncertainty involving matters of degree, the future evolution of China could be a matter of tipping points that lead to widely divergent outcomes
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