China’s Achilles heel
Remember the article by thomas friedman rebutting jim chanos on china?
Well, Michael Pettis has written an article to dismiss Friedman’s argument about never short China due to its massive reserves.
Pettis draws on the history of US in 1920s and Japan in 1980s, when they too have massive reserves, but still succumbed to economic depression. He does not imply that China will follow the same path but cautions that massive reserves can’t protect China from domestic bubbles and overcapacity.
Here’s the link to that article
Old-time generals tends to fight the last war. Remember Maginot line, well the 2 trillion plus reserves may not withstand a domestic blitzkrieg.
Entry filed under: Watch your step.