On Monday, the Chinese will celebrate their new lunar year—The Year of the Monkey. Based on its traits, astrologers are predicting that the year will be a difficult one for investors, and that financial markets are likely to remain volatile.
That is perhaps not a very difficult call to make. Economic indicators and market movement in the recent past suggest that things are not going to be easy in the world’s second largest economy.
There are multiple challenges that markets and policymakers will have deal with during the year.
For instance, the latest news shows that foreign exchange reserves once again declined by about $100 billion in January to reach their lowest level since 2012.
This is after the Chinese central bank burnt a similar amount to defend the renminbi in December.
If capital outflow is any indication of confidence in the economy, The Year of the Monkey will indeed be difficult for China—and the world will have spillover effects to manage.