16 May 2012

Michael Pettis on China: “The Growth Rate in Investment Is Going to Collapse”

Posted In: Economics

“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.”

Tags: China

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About the Author(s)

Rebecca Fender, CFA

Rebecca Fender, CFA, is chief of staff for Research, Advocacy, and Standards at CFA Institute. Previously she lead the Future of Finance initiative, which is the thought leadership platform for CFA Institute. The group publishes studies to help investment professionals build their careers and serve their clients more effectively. Their paper Investment Professional of the Future was recently awarded Best Investment Industry Paper of 2019 by Savvy Investor. Fender has testified before the US House Financial Services Committee AI Task Force on the impact of artificial intelligence on investment roles. She speaks regularly at industry events and has been quoted in the Financial Times, Bloomberg, and the New York Times, among others. Prior to joining CFA Institute, Fender was a vice president at BlackRock working with pension funds and endowments, and she also worked at Cambridge Associates, where she published research about manager selection. She earned her undergraduate degree in economics from Princeton University and holds an MBA from the Darden School at the University of Virginia.