In the past week, the S&P 500 has lost 11 percent, and the correction isn't over, says star investor Wilbur Ross, chairman of WL Ross.
The correction is in the sixth inning,
Ross told CNBC. "I don't think it's going to have a very serious downward direction from here. But I think there will be lots and lots of volatility around whatever is the midpoint."
He spoke before markets opened Tuesday. Hours later, a strong rally on Wall Street evaporated and stocks ended with deep losses. In a dramatic trading session, major indices turned negative in the final minutes of trading after previously climbing almost 3 percent.
China's woes have sparked much of the U.S. decline. The Shanghai Composite Stock index has plunged 22 percent in the last four sessions alone. Ross says he is still investing in China, but like others, he maintains that the 7 percent economic growth rate reported by the Chinese government is vastly overstated.
Weakness in electricity, natural gas, steel and cement consumption shows that the true growth rate is a lot closer to 5 percent, he says. Some economists say it's as low as 3 percent.
The U.S. economy won't suffer much from China's economic slowdown, as U.S. exports to the nation comprise less than 1 percent of our GDP, Ross says.
Still, our economy is only "limping out of recession," he said. U.S. growth totaled a mediocre 2.3 percent in the second quarter, and the Atlanta Federal Reserve's forecasting model puts growth at only 1.3 percent for the third quarter.
As for China, some commentators sounded a note of panic earlier this year about the potential for its economy to exceed the United States in size. But now things look a little different.
"Views about China’s economic prospects appear to be shifting from serious concern to near panic," Eswar Prasad, a Cornell University economist who formerly headed the IMF's China division,
told The Wall Street Journal.
Chinese authorities devalued the yuan two weeks ago, leading to a 3 percent drop, and now they're flooding the financial system with liquidity.
“The world is starting to realize China is not nearly as competent as thought, especially in the economic sphere where everyone gave it good grades,” Fraser Howie, co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise,” told The Journal.
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