RESEARCH:Fisher Capital Management News:Will China’s Economy Stumble?

China, along with other emerging countries, is the great hope for global economic growth.

The developed economies, bruised and aching, are pulling themselves slowly back to their feet after the Great Recession.

As Western consumers and governments struggle to get on top of their debts, they are not going to be the source of booming demand for goods and services they were in the last decade.

China by contrast slowed down a bit in the recession and then rapidly got back to something like full speed.

From 2007 to 2011 China accounted for as much of global economic growth as the G7 leading industrial countries combined.

Essential goodsChina is a very important market for suppliers of commodities; Australian coal and iron ore and Brazilian soy beans for example.

It must be said China is also a big exporter, with a hefty trade surplus. That means in terms of global demand for goods and services overall it takes more than it gives.

But imports are growing so China is providing an increasingly important market for some.

But will the powerful performance be sustained?

There are some of sceptics.

The Wall Street Journal recently declared “after years of housing prices gone wild, China’s property bubble is starting to deflate”.

The result is usually painful. Just look at the US, Ireland, Britain, Spain where bad property market loans have been a central feature in the financial crisis.

Rising pricesThe Chinese authorities are getting increasingly uneasy about inflation.

They have repeatedly raised bank reserve requirements, a measure intended to curb the growth of credit.

And then there is Dr Doom himself, Nouriel Roubini, the New York University Professor, prophet of the financial crisis, warning about China slightly further into the future. He says China could face a “hard landing”.

He thinks the economy is too dependent on investment. Very high rates of investment create excess capacity and they can’t be sustained.

They can leave debt problems in their wake as borrowers who built housing or commercial buildings don’t get the income from them that they anticipated.