China's crackdown on ed tech cos could be India’s gain: Mark Matthews
China might end up being a vanguard or pioneer in the swing of the pendulum away from capital toward labour. If China can take on the tech giants, maybe others will think they can do the same thing, says Mark Matthews, MD, Julius Baer.
The last time we interacted, the big worry in the world was inflation. Today the worry in the world is slow growth. What is going on?
Well what is going on is the Purchasing Managers Indices are all coming down and I do not think that is any problem because they are coming down from levels that were never sustainable. If you look at America for example, PMI above 60 has really happened only three times in the last 30 plus years. Now we are back in the high 50s, which is still a very high number but PMIs lead the economy and so they give us a pretty clear signal that the growth did peak in June. I do not see any cause for concern. It had to peak at some point and that does not mean it is going away. It just would not be as big as it was before.
Could there be a snowball effect of what is happening in the Chinese internet/tech companies because that is one big pocket where billions of dollars of market cap got eroded? Could it be a problem for leverage traders?
I imagine that the first step for people who are selling China will be just to go into something safe like cash because they have just been scared by quite unexpected and unprecedented events and they do not quite know what to do; they are a bit shocked. So they will move their money into cash but then they are looking to redeploy it in countries outside of the United States that have new economy stories and I think India falls into that category. The size, of course, is totally different. India’s new economy is tiny in terms of the offering compared to China but there is a healthy IPO pipeline and so it will end up benefiting countries like India rather than being a net negative.
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