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Is China’s Debt Concern Overblown?

Sarah Sands

George Soros: Is China Becoming the US of 2008?

(Continued from Prior Part)

Is China’s debt concern overblown?

According to a Bloomberg survey, Qu Hongbin, an economist at HSBC Holdings (HSBC), largely agrees with George Soros’s statement. He wrote that China’s debt concern is overblown and that policy easing isn’t as bad as investors think. He also pointed out that Soros already warned about a 2008-style crisis at a panel in Washington in September 2011.

China’s economic indicators improved in recent months

The recent Chinese growth drivers are changing, reflecting shifting trends in the Chinese economy. Industrial output, retail sales, new yuan loans, and fixed-asset investments all improved in March. They exceeded estimates. These indicators show that the Chinese economy (FXI)(ASHR)(YINN) is accelerating. Industrial production recovered to 6.8%—the strongest in nine months. Fixed-asset investment growth rose 10.7%.

According to Qu Hongbin, since debt is increasing, volatility is also increasing. But if growth drivers continue to improve in the next few months, then this emerging economy’s (EEM)(VWO)(EDC) outlook may change.

Performance of China-focused mutual funds

The Neuberger Berman Greater China Equity Fund – Class A (NCEAX), the Matthews China Fund – Investor Class (MCHFX), the Guinness Atkinson China and Hong Kong Fund (ICHKX), the Oberweis China Opportunities Fund (OBCHX), and the John Hancock Greater China Opportunities Fund – Class A (JCOAX) returned 8.6%, 4.6%, 8.2%, 4.3%, and 9.8%, respectively, over three months.

To learn more, read Can China’s New Growth Drivers Wake the Dragon?

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