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Chinese policymakers have been engaged in a gargantuan effort to switch their export-dependent economy, reliant on volatile international demand, to another engine: consumer spending at home. At the same time, they are battling to bring more competition and free market approaches to stodgy state industries; and to tackle the legacy of an unsustainable borrowing binge, including bubbles in the property and stock markets.  These would be a formidable set of challenges for any political leaders, and while the state of the Chinese economy is hard to assess, a number of warning signs have been flashing, including a share price plunge on a scale reminiscent of the US’s 1929 Wall Street crash and most recently, an 8.3% drop in exports in July.  Official figures show GDP growth in line with Beijing’s 7% target; but Fathom’s analysts, who study other measures, such as electricity usage and freight volumes, say it appears to be closer to 4%. Britton describes the depreciation as “China, doubling-down on its bet,” and warned: “If we are right about the hardness of the landing they’re facing, you ain’t seen nothing yet.”  Adam Posen, of the Peterson Institute of International Economics in Washington, says China’s motivation may only become clear over time, but markets will be asking themselves “is depreciation a side-effect of liberalization or is liberalization cover for devaluation?”  But whatever the reasons behind it, Beijing’s economic gear shift will have far-reaching effects. Not everyone is as apocalyptic as Edwards; but he believes the new wave of deflation emanating from China could “overwhelm already struggling corporate profitability and take us back into outright recession”.  “As investors realize yet another recession beckons, without any normalization of either interest rates or fiscal imbalances in this cycle, expect a financial market rout every bit as large as 2008.”