Friday, April 15, 2011

Dr. Doom does China

Uber-bear Nouriel Roubini has turned his sights to China, and he doesn't like what he sees. This is required reading, people.

Here's an excerpt:

When net exports collapsed in 2008-2009 from 11% of GDP to 5%, China’s leader reacted by further increasing the fixed-investment share of GDP from 42% to 47%.

Thus, China did not suffer a severe recession – as occurred in Japan, Germany, and elsewhere in emerging Asia in 2009 – only because fixed investment exploded. And the fixed-investment share of GDP has increased further in 2010-2011, to almost 50%.

The problem, of course, is that no country can be productive enough to reinvest 50% of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem.


1 comment:

whoshallscape said...

China = Wile E. Coyote just as he's getting to the cliff edge. He hasn't gone off yet, but it's waaaaaay too late to avoid doing so, and he hasn't noticed the cliff edge is even there because he's too busy chasing the roadrunner of double digit growth.