The Fixed Income Garden 2By Lucy O’Carroll and Richard Dunbar, Aberdeen Investment Solutions, Aberdeen Asset Management
Global stock markets lost more than $5tr in the fortnight following China’s devaluation of the renminbi on 11 August, and commodity prices fell on one measure to their lowest this century.
On an economic level, the worldwide reaction was not surprising. China now accounts for more than 15 per cent of global activity and an even higher share of global growth – around 25 per cent on International Monetary Fund (IMF) calculations.
Furthermore, China’s response to its economic challenges has lacked clarity and, at times, faltered. This has created two uncertainties, which have played on the minds of market participants. First, have China’s government and central bank lost control of their economy? And second, could events in China and their market fallout derail the gradual pick-up in global growth pencilled in for 2016? That confidence was first shaken when the stock market bubble burst.