The AFR and Citi would like you to think so:
The market is too focused on China’s pace of growth and its debt levels, disregarding critical reforms that will have greater relevance over the long-term.
…“With the experience of the subprime crisis, we’re so fixated on leverage,” she said during a visit to Sydney last week. “Here is a country in the last five years that has leveraged a lot … That is the obsession of China which will probably not go away any time soon. You cannot draw simple analogies that what happened to the US will happen to China, or what happened to emerging markets will happen to China…Most countries at the peak of their credit booms they have already been financing their credit booms through foreign capital … when you have a loss of confidence as a foreign investor, you have a sudden stop of capital flows that can be a massive trigger for [a credit shock],” Ms Chua said.
So, this time it’s different then?
Credit crunches can happen internally as well as externally. The US “savings and loans” crisis is an example. Arguing from false analogy that China has limited risk is poor dialectic.
Also, a successful long term reform campaign will slow the Chinese economy, and make it far less commodity intensive, so I’m not sure why that’s being celebrated as the alternative.
The high Australian dollar and iron ore equities that are have decoupled from the underlying price do not tell me that the market is China paranoid, either. If anything it’s the opposite.
Disregard the Citi comments completely. Dalian iron ore futures down 1% at the open today.
