Yesterday, I laid out the case for a Chinese real estate crisis. Lest I be accused of biased thinking (guilty as charged many times over I am sure), today I am sharing the case for Chinese reform and a relatively smooth transition to a more balanced economy. I agree with GaveKal on this issue (and utilized much of their brilliant research in this piece)—reform in China is required if the leadership’s goal (and we know it is) is to surpass the US economy, challenge the US dollar’s reserve status, and create a solid platform for geopolitical dominance. I shared this essay with Black Swan subscribers last week.
- China slows but succeeds in its reform process. China has already made progress even though growth is decelerating. In fact, the bullish argument doesn’t argue growth is slowing in China; they agree it will likely slow even more (slowing growth is in fact one indication of reform; a surge in growth is likely the result of another blanket liquidity injection leading to more overcapacity, bad loans, and higher speculation that will only make it harder to avoid a financial crisis).
Jack Crooks
President, Black Swan Capital
