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June 13, 2011 at 07:14 AM
Nouriel Roubini, the economist who forecast the global economic crisis, says that there is a "meaningful probability" that China will be in for a "hard landing" in 2013, and that in its current handling of its debt crisis, the euro zone is piling up problems that it will have to face in the future.
Roubini, Chairman of Roubini Global Economics, speaking at the Nomura Asia Equity Forum in Singapore, said, according to a Reuters report, that although China managed to avoid trouble during the world credit crisis, its struggle to continue to increase fixed investments will put it into a downturn after 2013. Pointing out that the country's investment was already 50% of GDP, he said that 60 years of data indicated that overinvestment resulted in hard landings. As examples, he mentioned the 1960s-1970s Soviet Union and pre-1997 East Asia.
In the report, he was quoted saying, "I was recently in Shanghai and I took their high-speed train to Hangzhou." This is a new Maglev train that has shaved the formerly four-hour trip between Shanghai and Hangzhou to less than one hour.
"The brand-new high-speed train is half-empty," Roubini pointed out, "and the brand-new station is three-quarters empty. Parallel to that train line, there is also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou. There is no rationale for a country at that level of economic development to have not just duplication but triplication of those infrastructure projects."
