China Econ­omy Head­ing To­wards a Train Wreck

The Economic Times - - Commodities Plus -

David Scutt

Bei­jing: If there’s one thing global in­vestors have come to ex­pect over re­cent years, it’s China’s abil­ity to gen­er­ate un­be­liev­able rates of eco­nomic growth.

Like clock­work, eco­nomic growth in the March quar­ter in­creased by 6.7% com­pared to a year ear­lier, smack in line with fore­casts. This reg­u­lar­ity is an ir­reg­u­lar­ity in it­self, en­sur­ing scep­ti­cism from many in fi­nan­cial mar­kets, as it takes just 15 days to gen­er­ate the fig­ure.

For ev­ery China bull out there, there now seems to be a bear. To Roy Smith, an aca­demic at New York Univer­sity, the break­neck growth seen in re­cent decades may be near­ing its end, sug­gest­ing that he sees par­al­lels with Ja­pan’s build-up of bad loans in the late 1980s, which ended up hob­bling the once high­fly­ing econ­omy.

“China has fol­lowed Ja­pan’s eco­nomic de­vel­op­ment model, and may now too be fac­ing a fi­nan­cial cri­sis like Ja­pan’s that it may not be able to con­trol, and that could di­min­ish its abil­ity to be­come the next Asian su­per­power.” —Busi­ness In­sider


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