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Chinese Crisis Approaching?
2008 Scenario Similarities...




According to economists at Nomura, China is on the verge of a financial crisis that mimics what happened in the USA in 2008.

China is expected to tighten its monetary policy in 2013 already, in order to minimize the risks of a "hard landing".

The obvious consequence of tighter monetary policy would be slower growth. China has already slowed down to 7.8 % GDP growth in 2012, strongly down from an average above 10 % - a mark the country has kept "afloat" for decades.

As we know, China is one of the biggest gold buyers in the World (and as numbers). Slower economic growth could potentially mean higher gold prices - if China resorts to buying more, as a hedge against currency crises.
Otherwise, the price of silver might actually dip, as silver is also a very important industrial metal (and a very volatile one).

If China's situation worsens (and it's very likely that this will indeed happen), we may see more appetite for precious metals - gold's price could get a boost. But silver on the other hand, might even lose value - this due to lower industrial demand (we know the fact that China uses up a huge amount of silver in industrial production).

As published before on Prime Values, many economies across the World are slowing down. In 2012 already, China has felt the effects "on its own skin", as their GDP growth figures slipped down to 7.8 % for the year. This is mainly due to the decreased quantity exports - thus, lower income levels. A production economy depending upon exports cannot grow forever, therefore China needs to increase internal consumption.



The Real Estate Bubble


According to economist Zhang Zhiwei, the conditions in China will worsen due to the real estate market.
It seems like China's going to suffer from an "overheated" economy-created real estate bubble that is about to pop. Let's not forget about the real estate bubbles in the United States, Dubai and Spain.



Higher Wages, Lower Productivity


In addition to the real estate bubble, China is also suffering because of wage increase-created lower productivity issues.
As the country embarked on a road lasting more than two decades, leading to socio-economic prosperity, the wages and life standards have increased as well. There are more billionaires and millionaires in China than in the USA or Europe, even. Gradually, salaries have increased and work force is no longer as cheap as it used to be.

The wage increase leads to lower productivity. Right now we're seeing the first effects of this phenomenon to the Chinese economy overall. Obviously, this phenomenon acts in synergy with the other factors and phenomena.



Decreasing Economic Growth Potential


As mentioned: the wages increase and profitability margins are harder to achieve, the overheated economy's real estate market boom has lead to a bubble and it will eventually pop, but a country whose economic growth is primarily based on production for the sake of exporting is "playing a risky game".
All of these and more are already affecting China's growth potential overall. The economy is not only slowing down due to the global economic crisis, but also due to the nature of China's growth and due to the way their economy works. One particularity is relatively low internal consumption, which will have to be increased.

Another issue worth mentioning is the fact that China's population is aging - the average age of the workforce is increasing. It will be harder to find the same number of young work force in the future.

Obvious consequence is the fact that if the other major global player have been severely affected by the crisis, they will buy less products from China. The latter will suffer due to less income from decreasing exports.



The Consequences of a Chinese Crisis
on Precious Metal Prices


Economic slowdown generally leads to higher precious metal prices. The Chinese economic slowdown will act as a catalist for gold. This will be a force that will push gold.

Could China's unraveling crisis be the next domino piece whose fall could lead to the predicted global economic collapse?
The crisis is already global, but the collapse hasn't been triggered yet. According to economist, investor and author, Peter Schiff, the worst times are yet to come and we're only at the beginning of the global crisis.

Only hard asset investments can save your wealth during crisis times. Of course, you will find necessary information and advice on Prime Values in order to get prepared. Those who will find themselves unprepared will suffer the most. The scenario as already happened during the 1930's depression, when those who owned gold and silver managed to pull through much easier, as opposed to those who only had money with no intrinsic value.





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