China risks ‘overblown’: Stephen Roach

Don't bet against China, former Morgan Stanley Asia Chairman Stephen Roach said Monday.

"Fears of the crash are overblown," he said. "China's slowed. We know that."

On CNBC's "Fast Money," Roach said that Beijing has the ammunition to provide stimulus to its economy but the fact that they're not using it was a positive development.

"They're trying to do some big changes in the broad, macro structure of the economy," he added. "So, they're prepared to take a short-term hit."

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While wages were increasing, they were still, "maybe 5 percent of ours" in the United States, Roach said.

"They're going up at a rapid rate from a low base, but they've got scale. They've got infrastructure, new capacity installed with new technology," he said. "They dwarf any of the smaller economies in Asia in terms of what they can deliver to the global marketplace."

Roach, who is a senior fellow at Yale University, said that he didn't see a China effect on U.S. Treasury bond yields.

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"China buys Treasuries because they want to manage their currency very carefully, but over time – over the next two, three, four years – China become more of a consumer, they're less of a saver," he said. "They have less surplus savings to invest in Treasuries and other dollar-based assets, so they're going to rebalance away from the Treasury play.

"And if we don't rebalance away from our deficits and lack of savings, then that's going to be a problem for our rates."

The growth of China's cities, Roach added, suggests that the country will continue to experience a robust economy.

"The urban share of the Chinese population, 52½ percent last year, headed up to 70 percent by 2025 or 2030," he said. "And with type of push for urbanization, they're going to be a high-investment, high-infrastructure economy for years and years to come."

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Roach also took issue with bearish outlooks such as that of Jim Chanos of Kynikos Associates, who has said China was a "great place to be short."

"This is an economy that needs a lot more to build the new cities that they require over the next 15 to 20 years," Roach added.

(Watch video: Jim Chanos: China 'great place to be short')

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.

— CNBC's Stephanie Landsman contributed research to this report. Follow her on Twitter: @StephLandsman.

Trader disclosure: On Aug. 19, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Steve Grasso is long BA; Steve Grasso is long BAC; Steve Grasso is long BBRY; Steve Grasso is long GDX; Steve Grasso is long GOOG; Steve Grasso is long HERO; Steve Grasso is long HPQ; Steve Grasso is long MHY; Steve Grasso is long LNG; Steve Grasso is long MJNA; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long QCOM; Steve Grasso is long S; Steve Grasso is long ASTM; Steve Grasso is long POT; Steve Grasso is long DECK; Steve Grasso is long DHI; Josh Brown is long JPM; Josh Brown is long AAPL; Josh Brown is long TGT; Josh Brown is long GOOG; Josh Brown is long QCOM; Josh Brown is long BK; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long BBRY; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long SE; Jim Lebenthal is long AAPL; Jim Lebenthal is long BAC; Jim Lebenthal is long C; Jim Lebenthal is long GS; Jim Lebenthal is long JPM; Jim Lebenthal is long WFC; Jim Lebenthal is long MS; Jim Lebenthal is long INTC; Jim Lebenthal is long WMT; Jim Lebenthal is long FB; Jim Lebenthal is long CAT; Jim Lebenthal is long DIS.