Photo: Bloomberg TV
Gary Shilling has long argued that China is heading for a hard landing.At today’s Bloomberg Link Conference, he said many people have the same shock-and-awe over China that they had over Japan in the 1980s.
But with many invested in Chinese growth, Shilling identified five criteria that China would need to meet to – as he describes – “take over the world”:
- Rapid growth in the economy and GDP per capita driven by robust productivity expansion: “China has that now but the question is, is China going to be able to continue that after they get through with emulating and stealing Western technology, which has really been the rationale for growth.”
- A large economy: Shilling said China has a very large economy but it has a huge problem with inequitable wealth distribution. “The tremendous income disparity in China between the wealth in the cities and the abject poverty in the hinterland makes it a little hard to know how to valuate.”
- Deep and broad financial markets: “It’s years away before China is going to have that criteria.”
- Free and open financial markets: “The Chinese government wants control. They are control freaks. They are still in the shadow of the opium wars and the dominance of China by western powers including the U.S. in the 19th century and I think they’re going to have to get over that if they’re going to have the kind of markets that are going to give them dominance.”
- Credibility: Shilling said economists can’t trust data coming out of China. “One interesting example in China, where there are areas which you can only get in by ox-cart and only in dry weather, China manages to put out its GDP numbers 21 days after the close of the quarter in question. … In this country which I would suggest has a bit more sophistication in this area, it takes us 28 days to get it out.”