China is at risk of a hard landing, but that scenario won’t play out until after 2013, according to Nouriel Roubini.There are two reasons why the Chinese economy could end up collapsing, according to Roubini.
Roubini, from Bloomberg:
“China is now relying increasingly not just on net exports but on fixed investment” which has climbed to about 50 per cent of gross domestic product, Roubini said in Singapore today. “Down the line, you are going to have two problems: a massive non-performing loan problem in the banking system and a massive amount of overcapacity is going to lead to a hard landing.”
Before dealing with these potentially disastrous problems, Roubini says China has to get its rampant inflation under control. Then, the country needs to cut fixed investment and encourage consumption, or else it will be hit with a hard landing.
Others feel the Chinese hard landing scenario is closer than 2013, with Gary Shilling saying in February that it would happen in 2011 or 2012. Others have described the Chinese hard landing as the greatest deflationary risk in the world.
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