Anxiety
Bloomberg Businessweek Middle East|December 01, 2018 The Year Ahead 2019

China’s policymakers are trying to deflate a lending bubble before it bursts, just as investors have begun to worry about state intervention in companies

For the better part of four decades, the rise of China’s entrepreneurial class has seemed unstoppable. Unleashed by Deng Xiaoping’s reforms beginning in the late 1970s, the country’s private businesses have fueled the biggest economic boom in the world.

But what if China’s nonstate sector isn’t as strong as it looks? What if, instead, it’s been pushed along by risky lending and frothy financial markets? That fear, along with concerns about increased government meddling, gripped investors in 2018. As domestic financial conditions tightened, Chinese equities went into the deepest sell-off among major stock markets.

The turmoil has ratcheted up pressure on the ruling Communist Party, which already faces the difficult task of combating an economic slowdown while at the same time preventing the country’s record debt burden from triggering a crisis. A failure to thread that policy needle could affect markets and economies around the world in 2019. China’s leaders “are fighting fires on so many fronts now,” says JohnPaul Smith, the London-based founder of Ecstrat Ltd. whose bearish stance on Chinese stocks in recent years has proved prescient. “Investors at the very least should be preparing for slowing growth. At the worst, there’s a possibility of considerable financial instability.”

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM BLOOMBERG BUSINESSWEEK MIDDLE EASTView All

The Novo Abides

Mike Novogratz, former Goldman Sachs partner and the loudest crypto bull on Wall Street, has made and lost a fortune on Bitcoin. He’s still all-in.

5 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Weaponizing Uncertainty

Trump’s tariffs were meant to make the U.S. a safe option for businesses looking to expand. It’s not working out that way.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

The Immigration Hackers

An Obama-era department of techies is working to streamline paperwork from inside the Trump administration. Results are mixed.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Letter From London, March 2029

A message from post-Brexit Britain about what the 2019 split from the EU hasn’t delivered.

8 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Saudi Weighs More Bank Mergers

Gulf bank consolidation trend gathers pace with Saudi plans.

2 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Money Markets Mixed Over Fed Rate Hikes

There is little agreement among commentators as to whether the Fed will continue to hike rates in 2019.

1 min read
Bloomberg Businessweek Middle East
1 January, 2019

Hey, Paul Ryan, What's Up? Budget Deficits

The professed fiscal hawk leaves behind a legacy of unsustainable shortfalls.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Dell EMC Bullish On 2019 Outlook

Cloud and technology giant plans further expansion in the Middle East.

2 mins read
Bloomberg Businessweek Middle East
1 January, 2019

Artificial Intelligence Has Some Explaining To Do

Software makers offer more transparent machine-learning tools—but there’s a trade-off.

4 mins read
Bloomberg Businessweek Middle East
1 January, 2019

What Buffalo Got, And Didn't Get, When Tesla Came To Town

After $750 million in subsidies and years of delays, critics say Elon Musk hasn’t done enough for his solar panel factory

10+ mins read
Bloomberg Businessweek Middle East
December 16, 2018