TYR 29 December 2012 reads

This Is What America Really Thinks @ Zerohedge Zerohedge does not comment it and neither will we.

The IMF on overinvestment @ China Financial Markets in his latest post Michael Pettis comments a recent report on China, by the IMF, in which it is argued that China’s economy, whose present investment levels stand at 50% of GDP, is and has overinvested significantly. This has been Mr. Pettis’ thesis for quite a few years, and only recently it is starting to gain wider acceptance. One of the consequences of this overinvestment is that the household sector (citizens) and Small & Medium Enterprises (SME) have been “forced” to subsidize growth at a rate of 5 to 8% per year, for many years. Mr. Pettis concludes that “the extent of Chinese overinvestment – even if we assume that it has not already caused significant fragility in the banking system and enormous hidden losses yet to be amortized – requires a very sharp contraction just to get back to a “normal” which, in the past, was anyway associated with difficult economic adjustments. It is hard to imagine how such a sharp contraction in investment will itself not lead to a sharp drop in GDP growth”. Something to keep in mind when so many in the West rely on a continuation of strong chinese growth as a support to their own economies.

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