Chen Zhiwu: Be Prepared For A Fiscal Crisis In China Within Three Years

In this episode of China Money Network, guest Prof. Chen Zhiwu, professor of finance at Yale University, discusses why he is an overall pessimist when it comes to China's long-term economic prospects, why he is worried about the economic spillover from China and Japan's dispute over Diaoyu Island for 2013, and why he thinks inflation will run rampant in China for the next ten years. Listen to the full interview in the audio podcast, watch an abbreviated video version, or read an excerpt. Q: Economists are generally optimistic about China's growth this year — you included. What are some potential roadblocks that could surprise us all on the down side? A: I think whatever domestic economic challenges there may be in 2013, the Chinese government will be able to use policy tools, or if necessary, accelerate infrastructure spending, to fight them off on a temporary basis. But whatever they do for the short-term benefit can create structural problems that will be difficult to overcome down the road. For 2013, the geopolitical risk may surprise people, especially given the noise from Japan and China over the disputed islands. Such hot button geopolitical factors tend to be underestimated by financial market participants. So I'm personally concerned for its impact on the economy. ......