Fears that China's economy is faltering are sending shockwaves through international markets Tuesday after the People's Bank of China unexpectedly cut key interest rates for the second time in three months.
China also announced that it would temporarily suspend publishing the youth unemployment figures that it began publicizing in 2018, with some seeing it as yet another sign that the economy is slowing down for the economic and military superpower.
DON'T MISS: Cathie Wood sounds the alarm on China
The news out of China was enough to wake up both Cathie Wood and Jim Cramer, two of Wall Street's most celebrated stock pickers, who both commented on the situation in China early Tuesday.
After it entered the World Trade Organization in 2001, China’s real GDP grew at a double digit rate for nearly 20 years. Rapid growth can cover many economic sins, typically excessive debt and associated leverage. Those excesses are surfacing in China now.
— Cathie Wood (@CathieDWood) August 15, 2023
"After it entered the World Trade Organization in 2001, China's real GDP grew at a double digit rate for nearly 20 years. Rapid growth can cover many economic sins, typically excessive debt and associated leverage. Those excesses are surfacing in China now," Wood tweeted.
Cramer was much more succinct. China needs to do something about its debt load for more financial stability in the future.
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"It is incredible to me that the Chinese just don't clean up the debt mess. I will offer a plan later this week for them. They need it," Cramer said.
"The people who write these articles about China almost never compare them to the U.S. We used to think that we needed China to grow fast for our industrials to prosper. That's no longer accurate. They have dramatically lessened their dependence on China. We have better growth."
The people who write these articles about China almost never compare them to the U.S. We used to think that we needed to China to grow fast for our industrials to prosper. That's no longer accurate. They have dramatically lessened their dependence on China. We have better growth
— Jim Cramer (@jimcramer) August 15, 2023
Wood is also of the opinion that the mainstream is getting the story on China wrong
"China is exporting deflation in a more profound way than I believe many economists and strategists appreciate. All else equal, the 15% depreciation in the yuan relative to the dollar in the last year should have increased its PPI inflation rate by 15%. instead it has dropped 4%," Wood tweeted.
But Wood believes that the U.S. Federal Reserve's actions could be having a ripple effect on China's economy.
"In our view, the Fed has precipitated and exacerbated the risk of a global deflationary bust. The impact of its record-breaking 22-fold increase in the Fed funds rate could be hitting China first and spreading to the rest of the world," Wood said.
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