The real economic and financial trouble spots in the world right now, however, are to be found primarily in Asia. On Wednesday, a report showing slowing growth in China's service sector weighed on global markets. The National Bureau of Statistics reported that China’s services PMI, a measure of activity, had fallen to a nine-month low of 53.9 in June from May’s 54.3. Although no major media outlet will come right out and say it, China is deflating.
The single best predictor of China’s business outlook is its stock market, and this can be seen in the relentless decline of the Shanghai Composite Index shown below. China has actually been in the throes of a bear market for four years and this can only mean its economy will experience more turbulence in the months ahead. If you were an odds maker and wanted to lay odds on where the next major economic crisis would begin, you’d have to point to China as being the most likely candidate.