Power Play: More weakness in China in 2016

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The Shanghai Composite is well off its highs of the year, but is still closing 2015 with a gain of nearly 9.5 percent. This impressive move is not a signal to load up on Chinese stocks.

Tanglewood Wealth Management Founder and Chief Investment Officer John Merrill tells CNBC's "Power Lunch" on Thursday China's economy could weaken further in 2016.

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"They have seen that their former stimulus strategy (infrastructure, manufacturing and housing) would just aggravate current overcapacity in these areas and add to the considerable debt they have tallied in the recent past," Merrill said.

He believes China still has room to stimulate their consumers, but this requires much longer lead times between investment and results.

"China will continue to devalue its currency relative to the dollar to stimulate exports and be more competitive with other emerging markets," Merrill said.

The Shanghai Composite ended lower on the last trading day of the year.