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China is an 'Economic Success Story': Warburg Exec

Wednesday, 8 Jun 2011 | 1:56 PM ET

China is dealing with "issues around overheating as a result of the extraordinary stimulus both here [in the U.S.] and there," Charles Kaye, co-president of Warburg Pincus, told CNBC Wednesday.

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China

Kaye, whose global private equity firm has invested more than $35 billion in over 650 companies in more than 30 countries, said that what "people forget when they use words like bubble and China is you get price bubbles, but there's not as fundamental demand-supply imbalance.

"So people talk about, for example, housing bubbles there[and] the reality is when you have 10 or 15 million people a year moving from farms to cities, the absorption capacity is rather strong," Kaye explained.

China has been a "far better economic success story than it has been a financial investors one, broadly speaking," he added. "Part of that is it's an immature environment. There wasn't a stock market until the early 1990's."

For the last 10 or 15 years China has been in a "very powerful trend" with ups and downs," Kaye said. "They'll work their way through it."

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In addition, he said that although the "unconventional policies pursued" in the United States after the financial crisis did work, it has been in a "weak recovery" of fits and starts.

That said, "in the underlying businesses the trends have actually been reasonably positive," added Kaye.

For example, high-end luxury sales, like Neiman Marcus, were hurt badly in the downturn but has done well since. Aramark food services has done better as well in the last couple of quarters. On the innovative side of the economy, technology and health care have been fine, he said. "They don't function on what goes on GDP [gross domestic product] growth."

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