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Don't count on China to save world economy: economist
Sao Paulo (AFP) Oct 16, 2008 Hopes that China will emerge as the world's economic savior in the global crisis are overblown and ignore that country's dependence on the US market, a US economist in Beijing told the Brazilian newspaper Valor Thursday. "A significant slowdown in US growth will hit emerging markets in general, and China in particular," Michael Pettis, professor of finance at the University of Beijing, said. The worldwide credit freeze and diminishing appetite for risk by investors will also hit the giant Asian economy, he said, stressing that hopes that Chinese domestic consumption could make up the predicted fall in exports were overstated. Pettis, who was interviewed via e-mail by the financial daily, also cast doubts on the solidity of China's banking system and highlighted the huge importance of the informal, unregulated financial system practised in Chinese society. He also said that "I don't believe the government is in such a strong fiscal position as many analysts believe," explaining that Chinese provinces and municipalities were probably hiding debts not shown in national accounting. Total government debt, he said, was more likely more than 50 percent of gross domestic product -- far higher than the 20-30 percent given by Chinese officials. "With global and domestic conditions apparently trending lower, it's easy to see a plausible scenario in which spending starts to radically overtake income. Revenue growth is already slowing markedly, while spending is rising," he said. Finally, Pettis highlighted the fact that China's demographic was shifting. The economically active generation contributing to its spectacular economic expansion in the past three decades was giving way to an older inactive population, he said. Related Links The Economy
G8 leaders commit to crisis plan
Washington (UPI) Oct 15, 2008 Group of Eight leaders issued a statement Wednesday saying they will work together to implement the G7 Plan of Action to support the global economy. |
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