China Stimulus May Ease Slowdown: Roach

Worries about ongoing weakness in Chinese manufacturing has been overblown, but its economy is poised for new growth over the next few years, Yale University Senior Fellow Stephen Roach told CNBC on Tuesday.

On “Fast Money,” Roach, who is a former chairman of Morgan Stanley Asia, said that China is employing its own form of stimulus.

“They’re doing a lot. They’re just not doing it in the way you guys are used to seeing it in the U.S.

They’ve announced very significant local government spending initiatives in a number of major cities, a number of provincial spending initiatives,” he said. “When they have a problem, they use investment. Yeah, they have high investment share of GDP but their overall stock of productive capital per worker is miniscule.”

Roach added that China still has a long way to go to broaden its economic base.

“You don’t inject consume DNA into a large economy like China overnight. I’d say over the next several years, you will be shocked and surprised at the strength of the emerging Chinese consumer, but they’re coming from a low base. It is not an overnight experiment.”

Trader disclosure: On Sept. 4, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Stephen Weiss is long HK; Stephen Weiss is long QCOM; Stephen Weiss is short X; Stephen Weiss is short TCK; Stephen Weiss is short AKS; Stephen Weiss is short VALE; Stephen Weiss is short AAPL PUTS; Joe Terranova is long VRTS; Joe Terranova is long WFM; Joe Terranova is long AAPL; Joe Terranova is long CSTR; Joe Terranova is long CHKP; Joe Terranova is long EMC; Joe Terranova is long NXPI; Michael Murphy is long WFC; Michael Murphy is long TGT; Michael Murphy is long SDS; Michael Murphy is long JCI.

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