- There’s no way China is going to hit its 5.5% target for growth this year, Stephen Roach told CNBC Friday.
- That’s a big deal for the global economy, which can’t rely on China to bail it out again, he said.
- “That cushion’s gone,” the economist said, noting the “formidable pressures’ facing Beijing right now.
Don’t expect Chinese growth to “cushion” the world against
the way it did after the financial crisis, because there’s no way Beijing will hit its economic targets this year, economist Stephen Roach has warned.
“There’s just enormous risk in China right now. There’s no way it’s going to make its 5.5% forecast. It’ll be lucky if it makes 4,” Roach told CNBC’s “Squawk Box Asia” on Friday.
China is the world’s second-largest economy after the United States, and the largest exporter of goods in the world. If it fails to get anywhere near hitting its 2022 target for growth, there will be repercussions for economies everywhere, according to Roach, who was chief economist at Morgan Stanley for Asia before becoming a senior lecturer at Yale University.
“That’s a big deal for the global economy, because in the aftermath of the global financial crisis, from 2009 to 2012, China was growing 8% and that cushion kept the world from lapsing back into a global recession,” he said.
“That cushion’s gone. China is not going to bail the world out the way it did after the global financial crisis. So this is problematic for the global economic outlook as well.”
Roach pointed to the impact of its zero-COVID policy on China’s manufacturing and services as pushing a change of mind for him.
“You know, I’m a congenital bull on China,” Roach said. “That’s not the case for me now though.”
“China’s facing formidable pressures, not just from rolling COVID lockdowns, but its steadfast insistence on deleveraging,” he said, referring to the government’s push to cut the debt burden.
“And then considerable risks from this really significant mistake that Xi Jinping made to tie himself to the villain, Vladimir Putin,” he added.
China has a target of about 5.5% economic growth for the year, but that has been cast into doubt by recent official data. Factory activity slowed in April as zero-COVID shutdowns brought factories to a halt and hit supply chains, it showed, while services took an even bigger hit.
Roach sees Beijing’s backing of Russia over its invasion of Ukraine as a key risk, and has previously said the sooner China breaks with Russia, the better. China is looking into ways to protect its economy if Western allies impose sweeping Russia-style sanctions on it, The Guardian reported.
Read more: The boss of a $2.2 billion hedge fund who’s called the last two big bear markets lays out why he’s moved virtually all his assets into cash. He shares what he wants to see before buying back in