Wednesday, June 26, 2013

Marc Faber vs O'Neill on China Liquidity Crunch

Marc Faber, said he "completely disagreed" with O'Neill's view that there was no liquidity shortage in China the world's second largest economy.

"I think China, if you look at the expansion of credit as a percent of the economy, had a colossal — not a small — a colossal credit bubble," Faber said, speaking from the FundForum International conference in Monaco. "There are lots of poor credits in the system, because all kinds of companies, instead of manufacturing and making money out of manufacturing, resorted to financial transactions. In other words, they borrowed at low rates from the state banks and then they lent out to very questionable borrowers." "The Chinese economy will disappoint very badly, and I have maintained for a long time that the Chinese economy does not grow at 7.8 or 7.9 percent at the present time, but more likely at just four percent," said Faber.

O'Neill agreed that a 7.5 percent expansion seemed unlikely while the central bank was implementing reforms, but said growth would still be sizable. "I don't think it's impossible that we could be looking at a couple of years of it [growth] being less, which in the big scheme of things is not that, big a deal," he said. "I mean 7.5 percent growth: that is the equivalent of the U.S. growing by four percent. It is huge. They are trying to change a lot of things at the same time and obviously as they creep forward more through time it gets probably more hard to control." - in CNBC


Related Posts Plugin for WordPress, Blogger...