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Investors Fear ‘Hard Landing’ in China: Pro

Javier E. David|Special to CNBC.com
Monday, 27 Aug 2012 | 1:33 PM ET
Beijing, China
Sam Diephuis | Getty Images
Beijing, China

Softening Chinese demand and a swooning stock market is making investors fearful about an economic retrenchment, a prominent China-watcher told CNBC Monday.

Jittery markets are riven by doubts about the U.S. recovery and Europe’s festering debt crisis. The weakness of two of the world’s major economic powers means that China “is really pulling its own wagon right now,” said John Rutledge, chairman of Rutledge Capital and a savvy observer of developments in the world’s second-largest economy.

“The commodity markets are going to be quite soft because of the softness in China, but more importantly western investor fears about hard landing in China,” Rutledge told CNBC’s “Squawk on the Street”. (Read more: China Stocks at New Lows)

Those fears are also manifesting themselves through weakness in mining companies such as BHP Billiton, and spilling over into neighboring economies such as Australia, the private equity investor suggested. (Read more: BHP Second Half Profit Slides 35%, Olympic Dam on Hold)

“Right now, investors are spooked about China. It will probably grow 8%-ish for the year still, but this is not a time to own Chinese stocks,” said Rutledge, a former economic adviser to presidents Ronald Reagan and George W. Bush. (Read more: China's Slowdown Is So Bad, the Market Is Cheering)

The situations in Europe and the U.S. also loom large for Beijing, Rutledge said, as weakness in both regions could curb demand for Chinese goods and services. “I don't really feel very optimistic about Europe at all, and the U.S. is not doing that great right now. So China's really pulling its own wagon at the moment.”

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