China’s efforts to prop up economic growth won’t help it escape the hard landing that will probably arrive in 2013 or 2014, said Nouriel Roubini, chairman and co-founder of Roubini Global Economics LLC.
The prospect of a soft landing in China is a “mission impossible,” Roubini said at a seminar in Helsinki today organized by Evli Bank Oyj. Over-investment “always” leads to a hard landing, he said.
Policy makers will “do anything possible” to keep growth in national output at rates above 8 percent and ensure a “delicate” political transition isn’t hampered by an economic downturn, Roubini said.
Growth in China’s economy probably slowed to an annual 9.3 percent in the third quarter from 9.5 percent in the three months through June, according to a Bloomberg survey of analysts. Officials in the world’s second largest economy will do what they can to “front-load” growth, pushing the risks associated with overheating out in the future, Roubini said.
Managing the economic downshift would fall to the Communist Party’s next leaders, as President Hu Jintao and Premier Wen Jiabao begin their transition from power late next year. A successor to Hu is scheduled to be picked at a conclave of Communist Party leaders late in 2012, with Hu and Wen stepping down from their government posts in March 2013.
Lu Zhongyuan, deputy director of the State Council Development Research Center, said at a briefing in Beijing last month that growth in the next five years will probably exceed 8 percent.
Roubini, who predicted the U.S. housing bubble while failing to foresee a rebound in global stocks in 2009, also warned there is a high probability of a recession spreading through the world’s advanced economies as the fallout of Europe’s debt crisis chokes recovery prospects in the U.S.
Europe shouldn’t count on much help from China, Roubini said. China’s discussion on supporting Europe is little more than “cheap talk,” he said. The government in Beijing “doesn’t really mean” it will help euro area nations struggling to emerge from the region’s debt crisis, he said.
Roubini predicted the bubble in U.S. housing prices before the market peaked in 2006. Still, when the Standard & Poor’s 500 Index fell to a 12-year low of 677 on March 9, 2009, he said it probably would drop to 600 or lower by the end of that year. Instead, the U.S. equity benchmark gained 65 percent for the rest of 2009.