CHINA TO THE RESCUE?

ASIAN GIANT ‘STRUCTURALLY UNATTRACTIVE’

China does not have the ability to come to the rescue of the western economies, according to the head of Asian equities at Schroders.

Adam Lewis and Gary Jackson

Fund Strategy, September 26, 2011

As global stockmarkets plummeted again last week, Robin Parbrook says the scope for the Chinese authorities to put through a major stimulus package is low.

Surging credit and a weak banking system, which has to absorb 20-25% of bad loans over the next five years, are just two factors that make China “structurally unattractive” says Parbrook, speaking at a Schroders investment conference in Hong Kong last week.“If the West is slowing, don’t expect to see this offset again by the emerging markets,” he says.

However, while Parbrook expects Chinese growth to slow to between a “healthy” 5-6% from next year onwards, Jim Walker, the founder of economic research consultancy Asianomics, says Chinese GDP growth is set to fall to between zero and 3% from 2012.

Walker describes the Chinese economy as a “catastrophe” which is set to be enveloped by an inflationary bust. He forecasts economic growth of between 7-8% this year, followed by 0-3% from 2012 onwards if China is “lucky”.

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