Beware China’s quantitative tightening

[Chris]

Interesting, while we're engaged in more quatitative easing, Beware China’s quantitative tightening

Last week, confirmation of a fresh round of quantitative easing by Fed chairman Ben Bernanke, lifted equity markets all the way to Asia.

But given the shift eastwards in the growth dynamics of the world economy, perhaps it’s the actions of the People’s Bank of China (PBOC) we should be more focused on.

After all, in the aftermath of the Lehman financial crisis, it was China — not the U.S. — that deployed a mega stimulus that helped lift not just its own economy, but everything from commodities and luxury goods to properties from Hong Kong to Vancouver.

Perhaps unsurprisingly, it has also been China that created the majority of new money globally in the past five years supported by its bulging trade surpluses.

Now, however, some analysts are warning China’s money tap is running dry and this could trigger the next major deflationary shock....