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Alternative Market Briefing

Could China’s economy, with a growth rate over 10%, collapse by a debt-fuelled bubble?

Wednesday, May 26, 2010

From Sagar Chakraverty, Opalesque Asia:

The most fascinating growth story in the modern economic history of the world is about China, the fastest growing economy for the past 30 years with an average GDP growth rate of over 10%. While the US still holds the first position, China is the second largest economy (with a GDP of $8.77tln on PPP basis) and the second largest importer but the largest exporter in the world. This nation is convincingly out of the 2008 crisis and most of the 21st century nations see the red nation as their savior.

While global investors remain buoyant about this nation, we are hearing some discomforting warnings. Some are saying that China is in the midst of the greatest bubble in history with a massive misallocation of wealth. It is hard to believe these claims but history has revealed that nothing is too big to fail.

Why are they bearish on China? The British hedge fund manager Hugh Hendry is the latest entrant into the club betting against China’s growth. He told Bloomberg last week that his London-based firm, Eclectica Asset Management, a privately owned investment manager managing mutual funds and hedge funds, had bought options on 20 companies in international markets that may profit should China’s growth come to a halt. The chances of this happening are bright, fueled by an unprece......................

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