Shilling: China Heading for a Hard Landing, Pt. 4
China’s Future, Part 4
Illustration by Jonathan Zawada
By A. Gary Shilling Jun 29, 2011 6:57 PM MT 4 Comments
Past performance, in China’s case, may be indicative of future results.
In late 2007, the Chinese government was scrambling to control a capital-spending boom. The central bank was concerned about 11 percent growth in gross domestic product, far above its official target of 8 percent, and about money flooding in from exports and direct foreign investment.
By Nov. 1, the People’s Bank of China had raised its one- year lending rate five times and reserve requirements eight times to soak up excess liquidity.
My firm’s research predicted then that the government would curb capital spending and excess liquidity just as exports weakened. Then, as excess capacity mounted, direct foreign investment would disappear and deflation would reign.
via Shilling: China Heading for a Hard Landing, Pt. 4 – Bloomberg.