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China Has Massive Firepower to Battle Global Slowdown: Stephen Roach

Friday, 13 Jul 2012 | 2:18 PM ET

Plenty of market pundits point to China as the main culprit behind weakness in the US stock market.

They say because the latest data suggests China’s economy is slowing you should run for cover; China is in trouble.

But Yale University senior fellow and former Morgan Stanley Asia executive chairman Stephen Roach thinks they’re all full of hooey.

“Beware of people who say things like this,” he tells us on CNBC’s Fast Money Halftime Report. “Oftentimes they’re just talking their own book.”

China: The Worst Behind Us?
Stephen Roach, senior fellow at Yale University, says Q2 should mark the low-point for China.

What he thinks China skeptics either don’t understand or conveniently forget is that China is both an export and investment led economy.

“Urbanization in China is happening at a pace that the world has never seen before. Currently, China is moving 15-20 million people from the countryside into the city and to do that they need to build a huge amount of low and middle income shelter and that is an ongoing feature of the Chinese economy.”

In other words, when China's exports slow, which is currently the situation, Beijing ramps up investment in urbanization.

“The state planning agency has approved lots of new projects – the rate of approval has picked up materially, and that’s the tool that really works (to drive the economy.), says Roach.

But you don’t have to take his word for it. All you need to do is look at Beijing’s actions a few years back.

“In 2009 when they had exports collapse they put the pedal to the metal on the investment side,” he says, And by 2010 China had bypassed Japan as the world’s second largest economy.

“China has a huge pipeline of unmet investment needs given the urbanization needs of their economy. It’s what they did (to drive the economy) 3-years ago and I'm convinced they’ll do it again.”

Posted by CNBC's Lee Brodie

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Trader disclosure: On July 13, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long JPM CALLS; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long PNC; Joe Terranova is long USB; Joe Terranova is long TCBI; Joe Terranova is long GS; Joe Terranova is long JPM; Joe Terranova is long SBUX; Joe Terranova is long MNST; Joe Terranova is long NKE; Joe Terranova is long WFM; Joe Terranova is long MAR; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPI

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