China Collapse next focus?

As the markets cheer the Spanish Bond auction, maybe it is time to start looking beyond the European mess. Growth is not coming out of Europe, that’s for sure. The US is trying to persuade us growth is back, but we can’t really see it, yet. What about China, the saviour, and still the World’s number 1 growth place? China is slowing. From the Guardian.

Albert Edwards, head of strategy at Société Générale and one of the UK’s leading “bears”, said the next 12 months would be the “final year of pain and disappointment”.

Predicting a sharp slowdown in activity in the world’s fastest-growing emerging economy, Edwards said: “There is a likelihood of a China hard landing this year. It is hard to think 2013 and onwards will be any worse than this year if China hard-lands.”

Although China emerged rapidly from the downturn of 2008-09, Edwards said the recovery had been the result of a massive reflationary package by the Chinese government. Beijing, he added, could not afford another big stimulus to offset a weakening of the economy. Falling imports have led to a widening of China’s trade surplus, but Edwards said exports were set to slow and a trade deficit was looming.

He added that despite the recent run of more upbeat economic news from the United States, the risk of another recession in the world’s biggest economy was “very high”. Growth had slowed to an annual rate of 1.5% in the second and third quarters of 2011, below the “stall speed” that historically led to recession. It was unlikely that the economy would muddle through, Edwards said.

Full article here.