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The good and bad news behind China’s 6.9 percent growth

Rob Schmitz Jan 19, 2016
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The good and bad news behind China’s 6.9 percent growth

Rob Schmitz Jan 19, 2016
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First, the bad news about China’s shifting economy: “The risk is that if the government doesn’t do enough structural reform, you wind up with lower and lower growth and higher and higher debt, and pretty soon you wind up looking like Japan in the early 1990s,” said Arthur Kroeber, managing director of GaveKal Dragonomics in Beijing.

He predicts that in 2016, China’s economy will see a turning point for the worse. “We expect to see factory closures, and bankruptcies, and write-offs in the heavy industrial sector to accelerate this year by quite a lot. We’re entering a new era,” Kroeber said.

He estimates five to seven million layoffs for China’s heavy industrial sector.

Now, the good news: “The reason I’m positive longer-term on china is you basically have a higher savings rate;  you do have the capital in the country,” said JFP holdings manager Jack Perkowski.

He says the challenge is to distribute that money to the private sector through the capital market. But if the first part of 2016 is any indication, letting the market do its job has been difficult for China’s leadership.

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