Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Tags: Yale | Roach | China | Economy

Yale’s Roach: China's Economy to Improve, Will Avoid Hard Landing

Monday, 16 July 2012 07:20 AM EDT

The Chinese economy grew 7.6 percent in the second quarter of this year and while in line with expectations, the figure was much lower than the 8.1 percent growth in the first quarter.

Ignore talk of a hard landing and a property bubble bursting that will bring the Chinese economy down further, says Stephen S. Roach, former chairman of Morgan Stanley Asia and current Yale economist.

The country has ample room to stimulate its economy via monetary measures like cuts to interest rates, and despite massive housing developments, China is experiencing a shift where millions are moving from the countryside to the major cities, which makes comparisons with other housing markets invalid.

"They've got a huge amount of ammunition that has yet to be deployed. Their real interest rates are among the highest in the world, they've just begun to ease up on monetary policy," Roach tells CNBC.

"Their fiscal deficit is one of the lowest in the world, and they've just started ramping up on state-supported spending for investment. And China's got a huge pipeline of unmet investment needs, given the urbanization trends that are ongoing in this economy," Roach adds.

"I'm very optimistic this is near the low point in China for this cycle right now."

Concerns have arisen that China is experiencing a property bubble, which could burst and cool the economy, though Roach warns against comparing China with the rest of the world.

"China is far more than a property bubble in Beijing or Shanghai," Roach says.

"They're doing urbanization at a pace the world has never seen before. And they're moving about 15 million to 20 million people a year from the countryside into the city. In doing that, they have to build a huge amount of low and middle income shelter."

While China's second-quarter GDP growth rate was the lowest in three years, other experts feel the country will avoid a hard landing and enjoy better days ahead, though they expect some bumps along the way.

"Overall, this is a soft landing, but we can see that the Chinese economy is undergoing serious pain," says Xianfang Ren, an economist at IHS Global Insight in Beijing, according to Reuters.

"I have 80 percent confidence that the economy will pick up in the third quarter as we have been in a slowdown for six consecutive quarters now. However, if the economy does not show an upturn in the next few months, factories will probably have to lay off workers and that will hit employment."

© 2023 Newsmax Finance. All rights reserved.

Monday, 16 July 2012 07:20 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved