Macroeconomic weekly roundup: China dips, Japan slips and Greece flips

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UPDATED: Greece's Prime Minister Alexis Tsipras has resigned and called early elections.

EARLIER: The roller-coaster that is the Chinese economy was again in motion this week after Chinese shares dove deeper into the red.

This follows a month of volatility, after China’s main market – the Shanghai Composite – continued to lose value.

Although stocks plunged on Wednesday, NBR reporter Jason Walls says China's central bank placed 120 billion yuan ($18.8 billion) worth of seven-day "reverse repos" into the money market during the session – the largest single day injection in almost 19 months.

“This helped to stabilise the market a bit, but it is still clear that the Chinese economy is cooling down,” he says.

The Chinese authorities have added a lot of stimulus into the market in the past year including interest rate cuts, a reductions in the reserve ratio requirement, tax cuts and last week’s shock devaluation of its currency, he says.

“But the more the Chinese authorities do to prop the share market up, the more it spooks investors and in turn, leads them sell off more stock,” Mr Walls says.

There is also bad news for Japan, as the country’s GDP shrank by 1.6% in the second quarter of this year.

“The slowdown is a major setback for Prime Minister Shinzo Abe, who has been trying to combat two decades of deflation through a stimulus program known as Abenomics,” says Mr Walls.

But there is some good news in the world economy and it comes in the form of an approved bailout package for Greece.

This week, eurozone finance ministers formally approved the first part of a new €86 billion bailout for Greece.

This is good news for the Greeks but reports have been circulating that Greek government is looking to announce a vote of confidence in the next few days.

“It would seem that it’s two steps forward and one step back in Greece,” Mr Walls says.

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