Greenspan Speaks on China
From Bloomberg :
Former Federal Reserve Chairman Alan Greenspan said he was concerned Chinese stocks might undergo a ``dramatic contraction'' after its main stock index jumped more than 90 percent this year.
The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose to a record 3938.95 today. The index more than doubled last year as investors bet corporate profits would be boosted by the world's fastest-growing major economy.
``It is clearly unsustainable,'' Greenspan told a conference in Madrid today by satellite. ``There is going to be a dramatic contraction at some point.''
3 things China has done to slow down its economy are:
1. The People's Bank of China on May 18 announced it will let its currency rise or fall 0.5 percent a day, up from 0.3 percent.
2. The central bank also raised interest rates for a fourth time in the past year
3. and ordered banks to put aside more money as reserves.
A somewhat more dramatic spin on China from Nouriel Roubini:
``The Chinese have lost control of monetary policy and now it has reached the stock markets,'' said Nouriel Roubini, chairman of Roubini Global Economics LLC in New York. ``There's a bubble, and eventually it's going to collapse.''
By the way, Chairman Greenspan is sticking with his previous prediction of a chance of a recession in the US this year at 1/3.