James Saft is a Reuters columnist. The opinions expressed are his own.
China may be about to teach the world another lesson about what happens when speculative money learns that its favored markets aren’t panning out.
In the U.S. in 2007 the subprime bubble collapsed into a still-smoldering heap when borrowers and speculators realized that real estate was topping out.
In China speculative investments including so-called “private lending” don’t promise an exact repeat but have enough elements in common to make the two situations rhyme.
One possible side effect: in a worst-case scenario the yuan CNY= might actually start to fall against the dollar.
A fascinating report released this month by Hong Kong-based strategists at Bank of America Merrill Lynch led by David Cui laid out the dynamics.