China’s Collapse

Caught an interchange between Gordon Chang, China analyst and author of “Nuclear Showdown,” and Stuart Varney on Fox Business. They were discussing the implications of Kim Jung Il’s death on China.

Varney mentioned that Paul Krugman writes today that the China bubble may burst. Gordon commented, “the one thing about China also is that they’re going into their own political transition which formally starts at the end of next year and probably lasts two years after that and I think right now decisions are not being made in Beijing – we can see that from a number of things – and now you have Kim Jung Il dying. They don’t need that in the Chinese capital.”

Varney asked if the bubble will burst in 2012.

“Definitely,” Chang said flatly.

Varney commented “that would be enormous for the world economy.”

Chang replied, “It would be, but you know the Chinese economy has really been unsustainable. They’ve been able to keep it going through a lot of fiscal stimulus and monetary stimulus and we’re about at the end of the string on this.”

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