Bloomberg Tokyo reports that China’s economic growth will plunge to near 2% in 10 years, following the collapse of a “debt- fueled bubble". This in turn, will cause a regional recession. The article quotes Harvard University Professor Kenneth Rogoff, former chief economist at the International Monetary Fund:
“You’re not going to go a decade without having a bump in the business cycle,” “We would learn just how important China is when that happens. It would cause a recession everywhere surrounding” the country, including Japan and South Korea, and be “horrible” for Latin American commodity exporters".
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The top performer on that list is CQQQ, the Chinese version of Nasdaq QQQ.
Rofoff adds that “Their response to the latest financial crisis clearly raised the risk that they have a debt-fueled bubble in the economy,”.
For him, land is “the best bet” as it is “the most common source” of crises. Real estate values in Shanghai and Beijing have “taken a departure from reality.
"A collapse would depress output gains to 2 to 3 percent, a “very painful” period which would persist for about a year and a half, Rogoff said. The slowdown won’t lead to a Japan- like “lost decade,”
"Chinese policy makers are trying to cool lending that helped property prices in 70 cities climb at the fastest pace in 21 months in January. The government aims to reduce new loans to 7.5 trillion yuan this year from a record 9.59 trillion yuan in 2009. The People’s Bank of China raised the proportion of deposits that lenders must set aside as reserves twice this year to cool the economy.
“If there’s a this-time-is-different story in the world right now, it’s China,” Rogoff said in the speech at a forum hosted by CLSA Asia-Pacific Markets. People say China “won’t have a financial crisis because there’s central planning, because there’s a high savings rate, because there’s a large pool of labor, blah blah,” he added.
“I say of course China will have a financial crisis one day.”