Tags: Roubini | China | Global | Economy

Roubini: China Isn't Strong Enough to Save World

Wednesday, 27 Jan 2010 09:31 AM

China cannot grow enough to the point that its economy buoys the global economy, says noted economist Nouriel Roubini.

A glut in worldwide industrial capacity is too great and still threatens recovery from the global financial crisis, and consumer demand in China is not strong enough to kick start growth, says Roubini.

“China cannot be the only engine of global economic growth,” Roubini says, according to MarketWatch.

While its robust economic development is boosting other economies and commodity markets, the country has still yet to evolve from being an export-led economy to one that grows on domestic demand.

“That's going to take a concerted policy change that will be radical and unlikely to occur fast enough,” Roubini says.

Furthermore, as a percentage of gross domestic product, consumption in China comes to about 36 percent, whereas U.S consumers typically account for about 70% of economic activity.

Boosting domestic demand in China will require Beijing to introduce more social benefits, such as unemployment insurance and other safeguards against any losses in income, says Roubini.

The Chinese economy grew 10.7 percent during the fourth quarter of 2009, up sharply from a 9.1 percent gain in the third quarter of last year.

Talk has risen that Beijing will raise interest rates to prevent the economy from overheating.

The government has already warned banks to be careful with their lending.

“Obviously the month-on-month growth momentum is very strong,” Xing Ziqiang, an economist at Chin International Capital Corporation in Beijing tells Reuters.

“So I think the chances for us to see an interest rate rise in the first quarter are increasing.”

For all of 2009, the Chinese economy grew 8.7 percent, above the official 8 percent target.

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China cannot grow enough to the point that its economy buoys the global economy, says noted economist Nouriel Roubini. A glut in worldwide industrial capacity is too great and still threatens recovery from the global financial crisis, and consumer demand in China is not...
Roubini,China,Global,Economy
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2010-31-27
 

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