BlackRock's Rick Rieder Says China Will Avoid Major Devaluation

  • Says China will `lock the doors, do capital controls'
  • Oil won't reach $65 again for at least a number of years

Rick Rieder, chief investment officer of global fixed income at BlackRock Inc., said China will avoid a major currency devaluation through capital controls and policy measures that will stimulate growth.

“The concept of the Chinese devaluing by 30 percent is not happening,” Rieder said Tuesday at the Harbor Investment Conference in New York. “What they’re going to try and do is transition that economy, lock the doors, do capital controls, try and have the service sector grow its way out.”

China over the weekend unveiled a record fiscal deficit, reflecting the government’s determination to maintain growth and put off confronting its debt -- now nearly 250 percent of gross domestic product. At the same time, the People’s Bank of China -- which has tried to restore stability to the yuan after outflows hit a record pace in recent months -- last week enabled banks to lend more by easing the amount of cash they must lock away, helping to compensate for the departure of money.

Still, slower growth throughout the emerging markets will drag on the global economy, said Rieder. Oil prices will remain low for years to come, increasing economic tensions and volatility in the Middle East, said Rieder.

“I don’t think we’re going to see $65 oil again, or certainly for a number of years,” he said.

Stimulus measures in Europe through the European Central Bank’s bond-buying program will drive demand for gold, said Rieder, who estimates that the metal is under-priced by 200 or 300 euros relative to the growing size of the ECB’s balance sheet.

“Money is going to go into gold,” said Rieder. “I think you’re going to see that play out in the system in a pretty significant way.”

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