Seven straight months of Chinese economic contraction suggested by one leading indicator means that the world’s second largest economy is probably in decline – although expert Gordon Chang took it one step further Friday.
“It’s also probable,” he said on CNBC’s “The Kudlow Report.”
Chang, author of “The Coming Collapse of China” and a Forbes contributor, held a bearish outlook that looks beyond the official Communist Party line.
“If you look at April, electricity production increased by 0.7 percent, and because the growth of electricity historically outpaces the growth of the underlying economy, that means they can’t be growing more than zero,” he said. “There are other reliable indicators that say less than zero.”
Chang noted that “China has been real trouble” since August and seriously faltering in the first quarter, possibly posting an economic growth rate of “zero or worse” in April.
For the United States, he argued, it doesn’t pose as big a threat as many people think because of its trade deficit with China.
Chang said that not all of China’s numbers are bunk.
“We can believe some of them,” he said. “And sometimes the regime doesn’t have much of a motive to dress up its numbers, but right now it does because it can see what’s happening.”
Peter Navarro, co-author with Greg Autry of “Death by China” and a business professor at University of California, Irvine, said that what Beijing needs to do is revalue its currency and allow the United States and Europe to prosper.
“China has basically been a parasite for the past 10 years, using unfair trade practices to basically take away the manufacturing bases of Europe the United States,” he said.
Navarro cautioned against underestimating the scope of the China effect.
“These are very perilous times for the global economy. I think it’s really important for everyone to understand this is not a short-term cyclical problem,” he said. “It’s a structural story that’s going to end in China, probably with a real estate bubble collapsing worse than what we had here.” Tune in:
"The Kudlow Report" airs weeknights at 7 p.m. ET.
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