China is lulling the market into a false sense of security

China is lulling the market into a false sense of security

Positive economic data from China has markets around the world rallying, but the country's rebound will be fleeting.

That's because the recovery was built on unsustainably looser credit conditions.

"To sustain that next year they're going to have to post in nominal terms a record flow of credit," Autonomous Research's Charlene Chu told Business Insider.

Meanwhile, China's economy is about to undergo a major structural change – one that will be made more pronounced by a US-China trade deal. That change could put the country's economy on even more delicate footing.

China's purchasing managers index (PMI) rebounded unexpectedly last month, so the market — taking this as a sign that the worst is over in the world's second largest economy — is rejoicing with a glorious global rally. After the print on Sunday night, the Shanghai Composite closed its session up 2.6% and markets in the US and Europe rallied as well.
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