China Credit ‘Bubble’ Headed for Bust, Blackhorse’s Duncan Says
“China has the greatest economic bubble in history,” said Duncan, author of “The Dollar Crisis” first published in 2003. “There’s a real risk it’s going to collapse in a Great Depression-style scenario.”
The pin that may prick China’s bubble, Duncan said, is a backlash against free trade among voters in the U.S., where unemployment last month rose to the highest since April. The U.S. House of Representatives in September enacted legislation that would let U.S. companies petition for duties on Chinese imports to compensate for the effect of an undervalued yuan. Protectionist sentiment could gather steam in the next two to three congressional election cycles, Duncan said.
Premier Wen Jiabao’s government has been creating about $250 billion worth of yuan each year “out of thin air,” Duncan said. To keep its currency from appreciating, the People’s Bank of China has been printing yuan to offset the dollars flowing in from a trade surplus that expanded to $27.2 billion in October, the most since July.