China’s Economic Bubble about to Collapse, Experts Warn

STRATFOR

Editorial note: Someone pointed out on one of the forums that I follow that a few years ago this same political risk forecaster published a book about the “coming war” between the U.S. and Japan…
3/7/2005 7:01:00 AM
To: National Desk, Business Reporter
Contact: Jason Deal, 512-744-4309, for Stratfor
WASHINGTON, March 7 /U.S. Newswire/ — China’s furious
economic growth in recent years has created a bubble
economy that is on the verge of collapse, according to
Strategic Forecasting Inc. (STRATFOR), a leading
private intelligence service.
In its latest Decade Forecast report, STRATFOR says
China’s economy is already on life support – with an
estimated $500 billion in bad debts threatening its
banking system, rapidly rising unemployment, rampant
government corruption and mismanagement, and foreign
investment dwindling.
“Capital flight by Western investors has already
begun,” the 2005-2015 Decade Forecast notes. Asian
investors have been stepping in to fill the gap, “but
they will be unable to sustain adequate levels of
investment for very long.”
The rush of foreign investment in recent years masked
the Chinese economy’s underlying weaknesses, STRATFOR
states, but this will not last. “Already there is
dissent forming in the international community and the
need for quicker profits is driving companies and
investors to look elsewhere.”
Looking ahead, the STRATFOR Decade Forecast for the
period 2005-2015 sees China’s economic growth
continuing to decline, leading to an increase in
internal tensions, social upheaval and violence, which
the central government in Beijing may be unable to
control after 2008.

1 thought on “China’s Economic Bubble about to Collapse, Experts Warn”

  1. There must be a contest going on to see who can be the first to predict China’s bubble bursting. Nothing really new here, Gordon Chang said the same in his book a few years ago. But they do have a point in that China is still not really addressing the nonperforming loans issue, and with WTO accession, the issue may come to a head sooner than later. But in today’s WSJ here’s a headline: “Foreign Capital Fuels Growth in Chinese High-Tech Firms.” I guess not all the money is leaving China. And I guess too that’s why China is in no hurry to revalue the RMB. It certainly is not to her benefit to do so, raising the cost of exporting to the US.

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