China’s policymakers are aggressively clamping down on what some experts are calling a credit bubble. This comes as China’s economy slows and incoming data continues to disappoint.
All of this has economists upping their odds of a hard economic landing, a scenario where growth slows to a point that causes unemployment to spike.
China’s economic problems are well documented
China Economist Wei Yao of Societe Generale SA (OTCMKTS:SCGLY) (EPA:GLE) noted while the problems facing the Chinese economy are well documented, they think many investors may still be relatively complacent about the risk of a hard landing. This could prove a costly mistake. The Chinese economy is still imbalanced: almost 50% of GDP comes from gross fixed capital formation, up from a third in 1997. Massive excess capacity, high and rising corporate debt and an increasingly marginalized private sector are other symptoms of deeply rooted imbalances in China’s economy.