People like Patrick Chovanec have warned of a Chinese hard landing for years, but don’t think we’ve escaped the worst of it.
Chovanec says the trade-off between credit expansion and inflation worries “is much more intense than it was a year ago or two years ago.”
“The incompatibility between those things has really reached a crisis point.”
The motivating factor is China’s need to roll over bad debt, which is locked into existing projects. Without new investment spending, China faces a severe falloff in GDP, which Chovanec says could be reported at 4.2 per cent for the first quarter — and could actually be negative.
Chovanec is interviewed in this video by Nouriel Roubini, who looks bullish by comparison.