Welcome to illuminati silver, we tell you
the truth about silver. Today is Friday 20th November 2015 and we
are covering today’s announcement concerning the slow-down in China’s Economy.
China’s economy grew 6.9% in the third quarter of 2015, the weakest rate since the global
financial crisis. The year-on-year growth rate is also below the government’s 7% target.
Though slightly above expectations, as most analysts were expecting growth figures of
6.8%, the data is expected to raise pressure on policymakers to increase monetary policy
to stem the slowdown. China’s economy has been hit by extreme stock market volatility
over the summer and weak economic data, causing concern on markets around the world.
Disappointing data has been emanating from China for a number of weeks. Earlier this
month, manufacturing data suggested the sector continued to contract for September.
For example: Profits at China’s state firms fell 9.8% in the first 10 months of this year,
the Ministry of Finance has said, with commodities-linked companies bearing the brunt of the pain. Combined
profits of state-owned enterprises totalled 1.88 trillion yuan ($294.51 billion) in the
period, the ministry said in a statement published on its website. It added; “The downward pressure
on economic operations remains relatively big.”
Imports saw a sharp fall for the past month while inflation eased by more than expected,
adding to fears of a rapid slowdown in the world’s second largest economy. This slowdown
comes despite repeated interest rate cuts and other stimulus measures introduced by
Beijing. Louis Kuijs of Oxford Economics told the BBC
“The government’s measures helped dampen the downside pressures but the problem is that
these pressures on growth are actually pretty severe …… What keeps China going at the
moment is consumption but this cannot fully offset those negative pressures on growth
and therefore – even though we see some stimulus coming from the government and we see that
having some impact – it’s not enough to prevent growth from sliding further.”
China has admittedly been attempting to shift from an export-led economy to a consumer and
services-led one. Beijing set an official growth target of “about
7%” for the overall year but Premier Li Keqiang said a lower growth rate was also acceptable,
as long as enough new jobs were created. Despite a slowdown in the industrial sector, it is
envisaged that the services sector will grow rapidly.
However, analysts say the steep fall in imports suggests domestic demand is not as strong
as the government would have hoped. Robert Peston, the BBC economics editor: stated
in an article published today: “Any Chinese growth, if real, now has a
disproportionate impact on the global economy. And the corollary, of course, is that any
slowdown beyond what’s expected by client economies all over the world – manufacturers
like Germany, commodity producers like Brazil – engenders disproportionate pain.”
Peter Spence the Economics correspondent for the Telegraph newspaper wrote on the 9th September:
A “hard landing” for the Chinese economy will likely lead the world into a recession
in the next year, Citi’s global economics team has warned.
Analysts at the Wall Street bank believe that a slowdown concentrated in emerging markets
will drag down demand and see economic activity fall well below its potential across the world.
They anticipate the global economy to slide into recessionary territory during next year,
and remain there for most of 2017. The chance of such a global recession now stands at 55%,
staff estimated. So what does all of this mean for precious
metals, and in particular, gold and silver? Well if the Chinese economy falters then demand
for industrial metals and commodities will decline further and this will most certainly
have a negative impact on the price of silver. From a supply point of view this will mean,
initially a surplus and then a deficit as other metals are not mined – with 70% of silver’s
mines supply being dependent on such mining. Its impact is as we have said before, negative
short-term and positive in the very long term for silver. As far as gold is concerned, much
depends on China’s ability to continue to afford its current rate of gold purchases.
Should this falter then again this will prove negative for gold prices, however, if the
world does enter into a recession, then quite possibly interest rates will not rise and
this could be positive for gold. Overall we still see downward pressure on the metals
unless of course that elusive ‘black swan’ swims by.
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of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of