It will be great but can we bear the pain?

China is our main enemy so if its economy sinks then very good for us. Trouble is that when a Titanic sinks there are a lot of casualties and we will not be immune. As its economy has slowed China is left with a huge overcapacity in steel production, which it is dumping on world markets. Arcelor-Mittal has announced a loss of $7.9 billion for 2015. Tata Steel reported a loss of Rs 21.27 billion in the last quarter, compared to a profit of Rs 1.57 billion during the same period last year. Net sales fell 16%, partly due to increased import of Chinese steel into India and partly due to reduced exports because of dumping of Chinese steel on world markets. In an effort to boost growth the Chinese government decided to increase spending and boost bank lending. But, will it work? Trouble is that China is a command economy and its leaders are used to controlling every aspect of people's lives. The only way to boost growth is by devaluing its currency which will make exports more competitive compared to that of other countries. The yuan was devalued by 3% in August last year and again in January but this led to a collapse in its stock markets. You can have a command economy but you cannot have a command market. The fall in the value of the yuan has led to an outflow of over $1 trillion from the country, known as Smurfing, as the rich try to protect their wealth. The Peoples' Bank wants to let the currency finds its own level against other currencies because China is keen to join the Special Drawing Rights of the IMF, which consist of the dollar, the pound, the euro and the yen, at present. The IMF will hesitate to include the yuan into the SDRs if China institutes currency controls. It could devalue the currency by 25% in one fell swoop and then let find its own level. This would increase exports and investors would buy the yuan because it will be undervalued. But Chinese companies hold $1 trillion of foreign currency debt which will be difficult to service and repay. Just as the fall in the price of crude oil has restricted Saudi Arabia's capacity to fund terrorist organisations all over the world so the fall in foreign currency reserves may restrict China's capacity to buy support for its government's aggressive policies in its neighborhood. One expert thinks that China has no choice but to continue to devalue its currency, thereby exporting its deflation to the rest of the world. Central banks have been reducing interest rates to negative in an effort to reduce the value of their currencies which will increase exports and stimulate growth, but it is not working. Very low interest rates help the rich to buy more assets, leading to asset price bubbles and increasing inequality. The rupee is also falling but the RBI cannot let it fall too much because retail inflation is already high. China's fall is welcome but it will be very painful for us. Too painful?