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Monday, July 22, 2013

China Headed for Economic Collapse in 6 Months and Here s Why!



China risks deflation trap as true GDP crumbles
China is sliding towards a deflation trap and may be in outright recession already if data are measured accurately, with serious knock-on risks for the global economy. 
“It is too late to avoid a hard-landing,” said Patrick Chovanec from Silvercrest Asset Management and a former professor at Beijing’s Tsinghua University. “To keep growth going they have to push extremely high levels of investment to even more extreme levels, and that is becoming very hard to do and very hard to finance.”
“The economic return on credit is rapidly declining. They increased loans by $1 trillion in the first quarter, but growth slid anyway and is now below levels seen in early 2009 after the Lehman crisis. It is no longer out of the question that GDP will actually fall,” he said.
Diana Choyleva, from Lombard Street, said the official Chinese figures show that the economy contracted by 0.2pc in the second quarter, rather than growing 1.7pc (7.5pc year-on-year) as claimed by the government.
The discrepancy comes from the inflation assumptions used by Beijing. The government relies on a fixed basket of prices that can flatter the true health of the economy.
A better benchmark is the “GDP deflator”, which uses an evolving measure of prices that better reflect the reality of China’s fast-changing economy. “If you measure it that way, China is much closer to deflation than people realise,” she said.

Read more at http://investmentwatchblog.com/the-2nd-largest-economy-headed-for-economic-collapse-in-months-china-is-sliding-towards-a-deflation-trap-and-may-be-in-outright-recession-already/#Oems7WbDA0YyxuJ6.99 
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