Tags: China | Hard | Landing | Roach

China Hard Landing Concerns 'Vastly Overblown,' Yale’s Roach Says

Thursday, 08 March 2012 10:07 AM

Concerns that China will enter a so-called hard landing are “vastly overblown” even as economic growth becomes more unbalanced, according to Yale University Professor Stephen Roach.

China’s government has done a terrific job in controlling inflation, Roach, former non-executive chairman for Morgan Stanley in Asia and chief economist, said at a conference in Shanghai today. The greatest risk to economic growth is the increasing reliance on fixed-asset investment and the declining contribution of private consumption, he said.

China, the world’s second-largest economy, pared the nation’s economic growth target to 7.5 percent from an 8 percent goal in place since 2005, according to a state-of-the-nation speech that Premier Wen Jiabao delivered to about 3,000 lawmakers at the annual meeting of the National People’s Congress that started on March 5 in Beijing. Officials will also aim for inflation of about 4 percent this year, unchanged from the 2011 goal, it said.

“I don’t think the banking system will collapse and the property bubble will burst,” Roach said in Shanghai. “These are all exaggerations.”

This year’s growth target, cut from the 8 percent goal maintained between 2005 and 2011, signals that the nation’s ruling Communist Party is determined to shift the makeup of growth toward consumption and away from exports and investment. Gross domestic product expanded 8.9 percent in the last three months of 2011, the least in 10 quarters.

China needs to boost jobs and increase wages in order to stoke consumption, Roach said today. The nation’s property bubble and banking issues also remain problematic for its economy, he said.

The government is scheduled to report consumer price data for February and fixed-asset investment figures tomorrow. Inflation may have cooled to 3.4 percent last month after rising 4.5 percent in January and 5.4 percent in 2011, while fixed- asset investment may have risen 20.5 percent so far this year, according to separate surveys of economists by Bloomberg News.

The yuan may continue to appreciate 3 percent to 5 percent over the next couple of years, Roach also said, adding that he doesn’t think the currency is undervalued.

© Copyright 2018 Bloomberg News. All rights reserved.

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Thursday, 08 March 2012 10:07 AM
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