China’s economic model is ‘washed up on the beach,’ says veteran investor David Roche

by | Aug 17, 2023 | Financial

The sunset glow is seen over buildings and a ferris wheel on May 13, 2022 in Beijing, China.Vcg | Visual China Group | Getty ImagesChina’s economic model is “washed up on the beach” and “not going to take off again,” which will have a big impact on global markets, says veteran investor David Roche.Despite a remarkable rally in stock markets so far this year, concerns have been growing over the potential ripple effect of a prolonged slowdown in China.Beijing has acknowledged its immediate economic headwinds and signaled more fiscal policy support, while the People’s Bank of China unexpectedly cut interest rates on Tuesday. China has experienced meteoric growth that outpaced developed countries over the past two decades, overtaking Japan as the world’s second-largest economy. However, many economists now see a longer structural downward trend amid diminishing contributions from property and manufacturing — the traditional pillars of China’s rapid economic expansion.The ruling Chinese Communist Party has set a growth target of 5% for 2023 — lower than usual objectives and notably modest for a country that the World Bank says has averaged 9% annual GDP growth since opening up its economy in 1978. Some economists now think Beijing may even fall short of that target.Roche, president and global strategist at Independent Strategy, told CNBC’s “Squawk Box Europe” on Thursday that global stock markets were failing to price in a long-term decline in the role that manufacturing plays in powering emerging market economies.”We all buy goods with more services in them than metal for example, so even the output of manufacturing is full of services,” said Roche, who correctly predicted the development of the Asian crisis in 1997 and the 2008 global financial crisis.He added that economies that historically exported manufactured goods will struggle to generate any meaningful growth in that sector, which will cause “big disappointments in populations, more geopolitical problems and more riots in the streets.””The Chinese model is clearly washed up on the beach with a huge number …

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