Chinese policymakers look set for a tough 2016 as global issues weigh heavily

It's often thought that a country's true reflection of both political and economic power is tested in adverse times where the status quo isn't complacency but rather one in which the depth of leadership quality within an organisation or government is put under pressure to execute the right measures at the exact moment when needed and still be able to have conviction in those decisions.

We've seen how the ascendancy of China's relevance to global affairs has rapidly taken shape over the past decades much to the surprise of the West who had always seen the nation as populous yet poor not only in terms of its people but also that of proper economic policy needed to fully realise the potential of its "sleeping"economy.

However with the collapse of communism and lack of any strong allies, the spotlight shone squarely on Beijing as to what economical solution they would produce in the face of oncoming questions after the death of a political ideology it had followed for many a year.

So far we've seen pockets of opportunities metamorphosize into huge growth engines that made even those in the West salivate in awe of such a tremendous achievement on a scale the world has never witnessed before stemming from one nation. It lifted the prominence up the ranks of hierarchy and placed more weighting on the thoughts coming out from China.

But as much as the rise of the next known empire of the world leaves humanity with a few questions surrounding the way the globe is set to change it also places more pressure on leaders from within China to respond in a way that would be deemed suitable or that of a higher authority, something which has never been tested in an ever changing world with a backdrop of issues piling up waiting for an appropriate stance or position.    

How can regulators prevent China's difficulties from precipitating a global disaster? https://t.co/ZCtHaRgQVZ pic.twitter.com/3yvBywjYSF

— Bloomberg Business (@business) January 6, 2016

Case in point, the  Chinese financial market meltdown that led to a dramatic $5 Trillion being wiped off stock valuations in a matter of days and subsequently drawing worldwide attention especially those involved in shifting trillions of dollars on a daily basis who hold the power at the fingertip of  a mouse button to halt financial market progression at a whim.

Government had embarked on a strategy aimed at liberalizing financial markets so as to draw parallels with their capitalist counterparts but in all honesty failed horribly in their quest as millions of naive greed driven Chinese middle class began taking their bets of which way the market direction would go. We saw a number of stories starting to surface at the beginning of 2015 of many who had blown away family savings in an attempt to grab a quick buck and it's safe to say we should've seen the rest coming.

At first seen as humorous but later certified contaminous to the entire global financial systems, worry really starting setting in at the point when the Chinese government decided to intervene to prevent any further reputational damage suffered from such an embarrassment.

In all fairness, Beijing wasn't properly fitted to suit up this kind of task and given the growth its economy had seen since 1990 from being a smaller player in the scheme of things to becoming the second largest economy in the world did perhaps lift the difficulty level to an extreme no one had ever seen.

One thing is for certain though, the way in which the Chinese government was scrutinised in their intervention efforts did place a larger expectation on them, something that hadn't been seen before and maybe a signal that they no longer reside amongst those who merely blow a puff of smoke into the air but of a nation whose actions are constantly under surveillance.

We are only 6 days into the new year and China has already filled the headlines, once again with questions raised over the certainty to whether they will lift the ban they imposed on large major shareholders of Chinese stocks in July last year in the hopes of injecting some sort of confidence into the stock market or will they extend it further and send jitters through the financial markets by suggesting that they don't feel equity markets are strong enough for support to be taken away.

This chart found on Bloomberg shows the exact extent to which Chinese policymakers face in making a tough decision that is consequential not only to themselves but also the entire global. Considering the US has come off the back of Quantitative Easing, valuations are high but not as much as China's. If government continues to intervene they simply kicking the can down the road and thus forking out billions of dollars to save something that needs to resolve itself. The bubble is in the system and there's no way of deflating it besides popping it.
   

UPDATE: North Korea calls hydrogen bomb test an act of "self-defense" from its enemies https://t.co/RdQS1GIZfs pic.twitter.com/QKHNzopfRS

— Bloomberg Business (@business) January 6, 2016

On the foreign relations front, although China featured somewhat in talks with world leaders surrounding the terrorist attacks committed by ISIS over the past number of months , it struck a soft tone which hasn't resonated as loud as some of its counterparts. The reasons for such a stance is unknown but it's not unfamiliar for the West to frown upon the allies China takes up with.

One of those allies is chief agonist North Korea under the leadership of Kim Jong Un who has so far sown seeds of bitterness followed by a veil of empty threats with the rest of the world after taking over the helm from his father Kim Jong il.

China understands the importance of keeping peace in the strategic region of Asia where any disruption caused by conflicts between North Korea and other Western alliances such as Japan and South Korea could result in a major negative impact on trade, a sector of the economy policymakers have become heavily reliant on.

However the recent developments this morning coming out of North Korea testing a "Hydrogen Bomb" came as a surprise to Beijing who immediately came forth and stated that war served no one. This would fly in the face of a recent visit by Chinese Premier Xi Jinping to Pyongyang late last year to calm down the communist state.

Kim wants to test the leniency of his Chinese counterparts, something the West will be looking closely at to see what response Beijing takes to threats on peace which could in itself heighten tension between them and the rest of the world.

 It'll be interesting to see how China deals with Kim, especially after trends of defiance and mistrust have started to emerge that seemingly put China in the spotlight. China wants to position itself in the best possible light when it comes to world peace but with its support for dictators such as Kim, it's proving a very difficult task.