China se dirige a un callejón sin salida

Aidan Yao y Shirley Shen, AXA IM - Sabado, 02 de Septiembre

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China’s path to the end road Is China destined to a financial crisis, lost decade or soft-landing? §  Fears of a disruptive unwind of China’s structural imbalances have plagued the market in recent years. Given China’s global significance, such a shock could spell disaster for the world. §  There are diverse views on how China’s imbalances may be corrected. Popular expectations fall into three categories: 1) a US-style financial crisis 2) a Japan-style lost decade, or 3) a China-preferred soft-landing.

§  Three hypothetical paths encapsulate these scenarios. The crisis and lost-decade cases are based on the experiences of the US and Japan during and after the 2008 and early 1990’s crises. The soft-landing path features a gradually maturing economy, with the imbalances unwound by successful reforms.

§  To determine which path is the most pertinent to China, we have compared its macroeconomic characteristics today with those of the US and Japan before their respective crises. Despite the obvious similarities, there are important differences which help to explain why China has so far avoided a systemic disruption.

§  Our baseline conclusion consists of three messages:

1.      A soft-landing remains the most likely path, given China’s extensive state control of its macro system.

2.      A prolonged economic stagnation is a greater risk than a financial crisis, because successful reforms are harder to achieve than simply kicking the can down the road.

3.      The key to which path China eventually takes will come down to policy responses. If Beijing can continue to push through structural reforms and spearhead economic adjustments, we think China stands a good chance of avoiding the fate of others and chart its own course for the future.

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