WEF – Yale dean expects major correction

“It is not that that current plans are not good, but there might be circumstances inside and outside China that will make a straight upward line very difficult,” said Dean Jeffrey E. Garten of the Yale School of Management today at the Business Summit in Beijing of the World Economic Forum. “China is due for a major correction.”
Many monumental problems have not yet materialized, he argued. “There is no social safety net in place. The financial sector only survives because it is held up by the government and is heading for a major crisis. And how can China bring its enormous environmental problems under control?”
The unreliability of all figures in China make it very hard to make a fair assessment of what is going on, Garten added. “And the government can do less and less as the market economy develops. The positive world economy and the open trade have been very positive for China in the past.” Garten does not expect this will continue unabated in the near future. “There are only two ways to deal with the current financial imbalances, a slowdown in the US or a huge depreciation of the US dollar.” Both will be bad for China.