Bank of England right to stress test for possibility of China meltdown

Fear that the next financial crisis will come from disruption in emerging markets is uncomfortably plausible

What vision of financial catastrophe has the Bank of England invoked this year as it tests banks’ ability to withstand shocks? Is it a collapse in UK prices provoked by the popping of the London property bubble? Or a break-up of the eurozone triggered by a Greek exit?

Neither, actually. The Bank’s sights are trained on distant horizons – the global economy and, specifically, a deflationary spiral aided and encouraged by a slowdown in China and a fall in the value of the renminbi. Quite right, too. Deflation and China are the biggest risks in the system.

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via Business Feeds

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