Facebook Twitter 新浪微博 Instagram YouTube Tuesday, May. 3, 2016

Time to put the theory of an imminent Chinese economic crisis to rest

(People's Daily Online)    16:41, May 03, 2016
Time to put the theory of an imminent Chinese economic crisis to rest
Warren Buffett gets interviewed at the 2016 stockholders' general meeting. (Photo/Xinhua)

Recently, Warren Buffett, CEO and largest shareholder of Berkshire Hathaway, mentioned at the 2016 stockholders' general meeting that he believes George Soros’s concern about Chinese debt is unfounded. Soros, a billionaire investor, stated that China’s current economy resembles that of the U.S. going into the financial crisis in 2008. 

Buffett is just the latest voice to express doubt about Soros’s observation. Various economic experts have pointed out that China is completely capable of dealing with any problems that stem from structural transformation. In fact, most of the people projecting a Chinese economic crisis are not basing their predictions in fact. The head of the China Economy and Finance Research Institute in South Korea, Jeon Byeong-seo, introduced four prerequisites for economic crisis: negative growth of the economy; negative balance of companies; a real estate bubble causing sequential bankruptcy in financial institutions; and a great outflow of capital leading to the sharp decline of foreign exchange reserves. Significantly, the current Chinese economy does not meet any of these criteria.

“It is undeniable that China’s debt issuance and major enterprise debt have put some pressure on the Chinese economy, but the pressure is far from being serious enough to cause a financial crisis,” said Zhao Xijun, Deputy Dean of the School of Finance at Renmin University. According to Zhao, China has the resources and capability to deal with its current debt issuance.

“Buffett was right, and he brought up some facts that have been previously ignored,” Zhao said. One such fact is that China has maintained its fast growth despite a global economic downturn. Most of the doomsday statements are therefore nothing more than grandstanding; China should continue developing its economy at its own pace, based on its own situation.

China’s sustainable economic development has won recognition from international organizations like the IMF. The UBS has raised its economic growth expectation for China from 6.2 percent to 6.6 percent; at the same time, the president of Asian Development Bank, Takehiko Nakao, agreed that the Chinese economy is not headed for a crash landing any time soon. 

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Yao Xinyu,Wu Chengliang)

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