Aussie in for Rough Times
The other global issue to consider is China, where renewed concerns over the country's troubled credit system have injected additional volatility into trading markets.
China is Australia's largest trading partner, as a central location for metals and other raw materials exports. Stock markets in China have seen single-session declines of more than 6% this week, so it is clear that these underlying worries are deep-rooted.
Efforts by the Chinese leadership to limit shadow banking practices are at the root of the issue. Shadow banking involves unregulated lending by Chinese banks in China to companies with limited lines of credit.
Proposed measures to reduce these questionable (and potentially destabilizing) practices will raise borrowing costs for Chinese companies, cut into manufacturing prospects and reduce demand for raw materials exports in Australia.
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