It seems that everyone is ready to burst the Chinese Bubble. China has been the worst performing of the world’s top 10 biggest stock markets this year. The main concern is that the Chinese central bank will raise interest rates by 27 basis points on Friday to squash any suggestion of a bubble and stifle an expected March inflation number of 3%.
The interesting effect of this is that the dollar has rallied on the speculation that China will raise interest rates. The thought is that the restriction of lending in China caused by raising rates will cause the global economy to stumble. This just re-affirms the truth that we live in a very interwoven world. No longer can one country do well at the cost of another. From now on we play in a bitter battle of tug-of-war.