China Will Respond Too Late to Avoid Recession, Citigroup Says

China is sliding into recession and the leadership will not act quickly enough to avoid a major slowdown by implementing large-scale fiscal policies to stimulate demand, Citigroup Inc.’s top economist Willem Buiter said.

   The only thing to stop a Chinese recession, which the former external member of the Bank of England defines as 4 percent growth on “the mendacious official data” for a year, is a consumption-oriented fiscal stimulus program funded by the central government and monetized by the People’s Bank of China, Buiter said.

   “Despite the economy crying out for it, the Chinese leadership is not ready for this,” Buiter, chief economist at Citigroup, said in a media call hosted Thursday by the Council on Foreign Relations in New York. “It’s an economy that’s sliding into recession.”

   Premier Li Keqiang is seeking to defend a 7 percent economic growth goal at a time when concern over slowing demand in China is fueling volatility in global markets. The true rate of expansion “is probably something closer to 4.5 percent or less,” Buiter said.

   Li has repeatedly pledged to avoid stimulus similar to the one following the global financial crisis in 2008 that led to a surge in debt for local governments and corporations.

Πηγή: bloomberg.com