The chairman of investment banking giant Goldman Sachs Group Inc has slammed China’s handling of its economy, adding that he would not currently invest in the country, the Wall Street Journal reported yesterday.
Lloyd Blankfein told the paper that China’s broad stock market intervention, including state-funded share buying, as it seeks to shore up slumping prices, was “ham-handed” and “sloppy.”
“They don’t have a lot of experience in this market stuff,” Blankfein, who is also Goldman’s chief executive officer, said of the Chinese Communist Party.
His comments came after Goldman this month said that it estimated China’s economy was growing at about 6 percent a year, lower than the official figures of 7 percent for each of the first two quarters.
Official figures show Chinese growth slowed last year to its lowest rate for more than 25 years.
Some analysts fear that the world’s second-largest economy could face a steep decline in expansion — with ramifications for the rest of the world — if it does not pull off difficult reforms to rebalance its model toward domestic consumption.
Blankfein said Chinese leaders “know what the problems are,” but changes in policy would be “really hard.”
He added that he “would not invest in China right now,” the newspaper said.
On Wednesday, the Organisation for Economic Co-operation and Development (OECD) cut its world economic growth forecasts for this year and next year, warning of a global outlook clouded by uncertainty over China and a slowdown in Brazil.
“The Chinese authorities face the policy challenge to sustain growth while advancing structural change and managing risks,” the organization said.
Goldman Sachs said financial markets are vulnerable because nobody can agree on what the US Federal Reserve will do.
Blankfein said US economic data do not support the case for higher borrowing costs.
A day earlier, Jan Hatzius, the bank’s lead economist, said there is a lack of consensus about what the Fed will do, which means markets might not be prepared for a move this week.
“I wouldn’t do it unless I was compelled,” Blankfein said on Wednesday in New York.
The Fed’s end of quantitative easing and higher taxes have acted as a brake on the economy and a form of tightening, he said.
The US central bank was to decide whether to raise interest rates after a meeting yesterday.
Additional reporting by Bloomberg
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