For an enjoyable, hour long video version of Hugh’s thoughts (among those of others), click here.
Hugh Hendry: Here Are Four Reasons China Will Start Sucking Wind
By Courtney Comstock, courtesy of Clusterstock
hugh-hendry-on-newsnight
Source: screen shot from you tube
People are way too psyched about China, says Hugh Hendry.
In a piece he wrote for the Telegraph, the hedge fund manager admits that China has been growing like crazy.
- China’s conomic growth has averaged 9% a year over the past 10 years, compared with 1.9% for the British economy.
- Last year, despite the credit crunch, China posted a remarkable growth rate of 10.7% compared with a British contraction of 3.2%
But here’s why China is not that great, according to Hendry:
- China, now the world’s biggest creditor, is also running persistent trade surpluses. That’s only happened twice before: with the US economy in the 1920s and with the Japanese economy in the 1980s.
- Unlike in most countries, China’s share of consumption within its economy has fallen relentlessly, reaching 35% of GDP in 2008.
- Foreign demand for its exports dropped. Now China relies on a massive surge in domestic bank lending to fuel its growth rate.
- China’s state planners have favored investment over consumption. China’s investment spending has tripled since 2001. Domestic consumption never grows fast enough to absorb the supply, and Chinese profitability is already low.
Read Hugh Hendry’s full article in the Telegraph >
See Also:
