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In its latest print edition, Barron’s magazine is calling for a Chinese hard landing — a scenario where a hot economy slows sharply, potentially falling into recession.Though recently announced interest-rate cuts and a ramp-up in the government’s already massive infrastructure spending could postpone the day of reckoning, to us it looks like the Great China Growth Story may be falling apart.
Barron’s Jonathan Laing doesn’t present much new evidence. However, he compiles almost all of the bearish arguments and quotes all of the big China bears like Jim Chanos.
“I’m being conservative when I say that the coming bust in China’s real-estate market will be a thousand times that of Dubai,” Chanos told Barron’s.
Here are some of the symptoms of a troubled economy that Laing notes in his massive article:
- China’s consumer accounts for just 35% of GDP, versus 70% in the U.S.
- Inefficient state-owned enterprises account for more than half of employment and fixed-asset investment.
- Highways and airports aren’t showing much traffic.
- Large apartment buildings are empty, signaling a housing bubble.
- It’s population is rapidly ageing. The size of it’s working age population will begin its descent in 2015.
The good news, Laing notes, is that China’s banking system is relatively robust. But even that is showing cracks. According to China expert Victor Shih, China’s government debt-to-GDP may be higher than 150 per cent and the data for non-performing loans may be grossly understated.
Read more at Barrons.com.
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