China’s recent stock market gains and its $585 billion stimulus plan have some experts saying the world’s third-largest economy will spark a global recovery from recession.
That’s highly unlikely. First, China isn’t big enough.
“China can't do it alone,” Michael Darda, chief economist at MKM Partners, tells Barron’s.
Although China’s economy has boomed in recent years, it still accounts for just over 6 percent of global economic output.
“At best, China is an up-and-coming super economy in good fiscal shape that will suffer a period of slowed growth over the next few years, but will be fine,” Jeff Lick, who co-manages Boston-based Galt Investments, told the investment weekly.
“At worst, it is an overbuilt and overinvested economy that relies too much on exports to the Western world.”
Even the 33 percent rise in Shanghai's A-Share Index since the government announced its stimulus plan last November may be more bark than bite.
That rally stems as much from excess liquidity as the prospect of economic revival, Michael Hartnett, Merrill Lynch's international-investment strategist, told Barron’s.
China’s own economic strength represents a big question mark now.
Exports, which have been the main driver of Chinese growth in recent years, plunged 25.7 percent in February from a year earlier.
Not all analysts are bearish on China. Former Reagan adviser and economist Martin Feldstein tells Xinhua news: “China has a substantial stimulus package that is going to be successful in bringing economic activity back to substantial growth sometime next year.”
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