China “Bubble” Is About to Pop, ‘Aftershock’ Author Declares
With the world teetering on the brink of a global recession, a lot of investors and economists are worried about the state of China's economy.
In the second quarter of this year, China's GDP rose 9.5%, stellar by most standards but well below the double-digit gains of the last decade. Many expect this deceleration to continue into the second half of this year.
A recent Bloomberg Global Poll of investors found that nearly two-thirds of respondents believe China's GDP will grow less than 5% annually by 2016. More than 10% percent see the contraction occurring within a year and about half said the slowdown would happen within the next five years.
For the better part of a decade, various market watches and pundits have been predicting a "hard landing" for China, only to be proven wrong as the country's economy continued to power ahead.
Undaunted, Robert Wiedemer, author of Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown, believes a hard landing is imminent, if not already in the works. He points to the recent collapse of copper, which has been attributed to lack of demand from China, as well as lagging growth rates from some of the country's supplier countries like Brazil and Australia.
To Wiedemer, the pivotal turning point was in 2008 when China's exports collapsed in the wake of the financial crisis and subsequent global recession. "The government sort of panicked. They vastly increased their money supply [and] vastly increased lending," he says. "They lent to everybody and anything to build infrastructure [and] to build real estate. That certainly saved the economy for a while, but I think it's a sugar high and it's going to pop."
Wiedemer cautions that China is now at risk of serious long-term inflation, which the country's central bank has tried to address by raising interest three times already this year and tightening bank lending requirements.
What does this all mean?
"When [China] pops I think it is going to be bad for a lot of things like stocks, commodities and so forth coming down the road," he says.
Tell us what you think: Do you think the China bubble is about to burst?
