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China Will Have “A Lot of Bad Credit Events” in Next Five Years: Beardson

Daily Ticker
China Will Have “A Lot of Bad Credit Events” in Next Five Years: Beardson

Academics, pundits, and pollsters have pondered for years whether China – the globe’s second largest economy – will replace the U.S. as the world’s leading superpower.

That growing belief led Timothy Beardson to counter the argument with his new book Stumbling Giant: The Threats to China’s Future. Beardson has been based in Hong Kong for 35 years and founded the first foreign investment bank in China. He says China will not become the big superpower some have forecast, at least not in this century.

Related: China Will Invest $1 Trillion Globally; How Much Will U.S. Get

So in the short term, what does this mean for investors? Beardson addresses investor frustration over the lack of progress in the Chinese stock market despite exceptional economic growth.

Related: If U.S. Kills Keystone Pipeline, The Chinese Win: Niall Ferguson

He argues that while two-thirds of China’s economy is now based in the private sector, 60% of bank loans have gone to state companies while 80% of stock market value is made up of state companies. In other words – the money isn’t going where the economic growth is. He tells The Daily Ticker this probably will change over time, but he believes China should “optimize capital flows” far more quickly and efficiently.

Related: America Leads the Way as Emerging Nations Like China Fade

And while prominent China bear Jim Chanos said on a Bloomberg Markets 50 Summit panel in New York Tuesday that China will have a “credit event” in the next five years, Beardson says he expects there to be “quite a lot of bad credit events” in that time period.

Check out the video above to find out why.

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