December 9, 2008

THE DRAGON STARTS WRITHING:

China heads for a hard landing (MoneyWeek, Dec 05, 2008)

"The Golden Years have shuddered to a dramatic halt," said Stephen Green of Standard Chartered. China's economy, which has expanded 69-fold since free-market reforms began in the late 1970s, is cooling rapidly, with the World Bank pencilling in GDP growth of 7.5% next year – the lowest in almost 20 years – and some analysts expecting far worse. [...]

Capital Economics pointed out that the latest rate cut will further depress household incomes, as the real return on deposits has been negative since last year. Longer-term, only an improved social welfare system will persuade the Chinese that their savings rate (25% of their income) is too high, said Xie. Given all this, Jim Walker of Asianomics now thinks China is likely to grow by 0%-4% next year, and there is a 30% chance of its economy shrinking. We can expect to hear a great deal more about a "hard landing" in China in 2009.

Posted by Orrin Judd at December 9, 2008 4:58 PM
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