China’s economy is tipped to keep slowing and the question is whether it is headed for a bumpy or a hard landing, Carlyle Group LP cofounder Bill Conway said yesterday in Seoul, South Korea.
“There is no smooth, everything-goes-great landing,” said Conway, who helps oversee US$193 billion of private equity holdings, real estate, credit assets and hedge funds as chief investment officer at Carlyle.
China’s central bank should lower interest rates, which are “very, very high” in real terms, he said.
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The nation needs annual growth of at least 6.53 percent in the next five years to meet the Chinese government’s goal of establishing a “moderately prosperous society,” Chinese Premier Li Keqiang (李克強) said on Friday last week in a speech to Chinese Communist Party (CCP) members, according to people familiar with the matter, who asked not to be identified as the remarks were not public.
CCP leaders yesterday concluded a four-day gathering to discuss their five-year plan for the nation for next year through 2020, the first since Chinese President Xi Jinping (習近平) and Li took office.
Policymakers are managing the priorities of both reforming the economy and keeping short-term growth fast enough so that structural changes do not cause a hard landing.
Official data showing expansion of 6.9 percent last quarter are at odds with models used by researchers, Bloomberg economists Tom Orlik and Fielding Chen (陳世淵) wrote on Tuesday.
Real growth might have been as low as 2.8 percent, they said.
A premature increase in US borrowing costs would raise the risk of a hard landing, Washington-based Conway said, adding that the US Federal Reserve might tighten its rates in December not because it should, but because it said it was going to do it.
A “bumpy landing” in China would involve a gradual slowdown in growth as the nation transitions to a more consumer-oriented economy, Conway said.
Even in this scenario, expansion would be hurt, he said.
Conway said he still sees opportunities in China.
Policymarkers’ ability to address the nation’s challenges should not be underestimated and money invested today is likely to be worth more in 10 years, he said.
“We do expect growth globally to be fairly muted, interest rates to stay low, the US dollar to be strong and get stronger, and we expect energy prices to stay low for a long time,” he added.
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