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Talks of a Chinese slowdown and hardlanding are surfacing again after the HSBC flash manufacturing PMI fell to 48.1 in March.But former chairman for Morgan Stanley Asia, Stephen Roach was on CNBC saying that talks of a hardlanding are overblown.
“While there is a slowdown, it’s benign. And too much is being made about the 7.5 per cent target by the premiere. These government targets have been too low for 10 years in a row and I think this one will turn out to be the same. Growth will slow to 8 – 8.5 per cent which is a number the rest of the world would die for.”
Roach said the slowdown right now is mostly driven by weak external demand which is unsurprising given the recession in Europe. He said Chinese import growth is strong reflecting resilience in internal demand and added that the Chinese government has lots of ammunition, firepower to spend if the economy slows and room to manoeuvre:
“I would definitely subscribe to the view that these fears over a hardlanding are vastly overblown. You’ve had a lot of people on your show and other shows talking about a banking crisis, that China’s a massive property bubble, that there’s a runaway inflation problem. Like most of these stories there’s a shed of truth to some aspects of it, but it’s a shred. It’s been vastly exaggerated.
Inflation for example, the government has done a fantastic job of controlling inflation which was a problem last summer and they’ve used multiple tools, administrative measures in the food area. A slowdown in bank lending through adjusting these required ratios and five monetary tightenings last year and inflation’s come in. So give them a little credit here.”
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