“What the world desperately needs is demand,” asserted Michael Pettis, professor of finance at the Guanghua School of Management at Peking University, in the closing session at last week’s 65th CFA Institute Annual Conference in Chicago.
With the United States likely to increase its savings rate and the euro in turmoil, he expects Spain to default and leave the eurozone soon. So who will be buying goods in the global marketplace? China has net negative demand, he noted, and will not be the solution to the world’s demand problem. China’s growth has been fueled by government investment, and even in the best-case scenario, he said, “the growth rate in investment is going to collapse.”