Concerns about a Chinese hard-landing set off by Beijing’s efforts to deflate the credit bubble are making headlines again.
GDP growth slowed to 7.7% in 2013, the lowest level in 14 years. And the slowdown has played a part in the emerging markets rout we have seen recently. But recent trade, lending data and Lunar New Year sales have come in better than expected.
We reached out to Jim Rogers, chairman of Rogers Holdings, to get his thoughts on the slowdown and on what everyone is getting wrong about China.
Rogers told us that we shouldn’t be very concerned about the slowdown in the Chinese economy. However, he does worry about China’s debt at the local levels.
He also took issue with the naysayers calling for a major crash.
Business Insider: What worries you the most about China right now?
Jim Rogers: The high levels of debt in some areas. Some of the provinces and companies have built up debt in recent years during the recovery, since there has been so very much artificial liquidity all over the world.
All the money printing in the developed world is causing distortions everywhere including China.
BI: How concerned should we be about the economic slowdown in China?
JR: Not much. The government is and has been trying to cool real estate. On the other hand, the Plenary Session in November decided to emphasise several sectors over the next decade or so. Those industries will be doing better no matter what happens in the world. So some will be improving; some declining. The government is trying to cool real estate so I would avoid [that].
BI: What is the one thing people get wrong when they talk about China?
JR: Few seem to understand the historical significance of what is happening there. Eg – Gordon Chang has been writing books and articles since 2001 predicting the collapse of China and the disappearance of the Communist Party. Jim Chanos has been predicting the collapse of China since 2009 saying it will be “1000 times worse than Dubai”. [I explained at the time that showed no understanding of Dubai or of China.] Many in China do not fully understand either.
As the US was rising to its power and glory during the 19th Century, we had a horrible civil war, 15 depressions [Yes, with a D.], few human rights, little rule of law, periodic massacres in the streets, etc., etc. yet we still became the most successful country in the 20th Century.
China will have plenty of setbacks along the way, as does every country, company, family, and individual that rises.