"Vastly overblown," is how Stephen Roach (formerly MS, now a Yale prof) describes fears of a...


"Vastly overblown," is how Stephen Roach (formerly MS, now a Yale prof) describes fears of a hard landing in China. A big fan of China's central planners, Roach says they've done yeoman's work controlling inflation and the next task is to wean the country off of a reliance on fixed-income investment at the expense of consumption.

From other sites
Comments (3)
  • gspriv
    , contributor
    Comments (4) | Send Message
     
    Folks like him have been consistently wrong in their ferocious criticism of US. Now it appears that their loving admiration of China is starting to look wobbly as well!
    8 Mar 2012, 02:24 PM Reply Like
  • HistorySquared
    , contributor
    Comments (33) | Send Message
     
    "wean the country off of a reliance on fixed-income investment at the expense of consumption."

     

    right, it'll be that easy for the government to give up almost all power, rid the government of the special interests that own the politicians, fix the environment, and undo the decade of misallocation of capital.
    8 Mar 2012, 02:42 PM Reply Like
  • JC51
    , contributor
    Comments (330) | Send Message
     
    It sounds like he's forgotten about the 700 million rural residents earning $1100 annually. That's in stark contrast to the salaries that the princelings receive at daddy's state-owned enterprise in Shanghai, where they can play video games all day in their high-rise offices. Who needs competition, right? The income disparity is getting worse and the farmers are becoming increasingly indignant towards the government's exploitative policies. There are two China's: The wealthy one that the foreigners see in the coastal cities and the poor one in the inner and western provinces like Qinghai that everyone ignores. Most "cheerleaders" deny that their are over 1 billion Chinese living in Sub-Saharan Africa conditions, but this is a fact. China is still a poor and fragile country.

     

    It's going to take decades for the central planners to reform the economy and it's going to be a very painful process. When fixed asset investment accounts for 60-70% of your GDP, you cannot simply turn the hose off without facing headwinds moving forward. There are too many companies and jobs at risk. Once the banks are forced to cut off the credit lines to the indebted and unprofitable LGFVs (local government funding vehicles), the real carnage will begin, particularly in the construction sector. For decades the banks have been keeping unprofitable state-run companies alive with cheap loans, but this policy has hit a brick wall. The government is facing two very difficult choices: They can keep lending to the LGFVs, which only inflates the bubble and delays the inevitable; or they can allow the bubble to burst, restructure the LGFVs, privatize the state-owned enterprises, strengthen the yuan, and just pray that the chips fall in their favor. I think they're doomed either way.
    8 Mar 2012, 04:38 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs