Nicholas Lardy: I am skeptic on the idea that consumer confidence in China is very weak

Why do you believe that we should be more constructive towards China’s economy? Well, I’ll just give you one example compared to what Mr. Fink said. You know, household consumption in China is 45% of GDP and it’s rising fairly rapidly and it’s become a significant source of economic growth. That said, there are deep seated structural problems that needs to be addressed and the market is looking for a fiscal boost to help. Those consumers that you were referring to, Nicholas, that are becoming increasingly a bigger part of the economy, is that coming? I would be surprised. I think the leadership is concerned that, you know, debt to GDP has risen to very high levels. Where there are financial risks and they don’t want to go back to a big stimulus program that adds to that debt. So I think they will take, they’ve taken a modest approach, they’ve adopted some stimulus policies, but that’s not the big push that a lot of market analysts are looking for. How could the Chinese consumer be confident when the housing market when real estate, is not off the mat? Well, that’s an interesting question. But last year the household saving rate went down substantially. People spent the growth of spending was way ahead of the growth of income. And that to me suggests these stories about lack of confidence are not exactly on the mark. If you have no confidence, then you’re going to save more. Your savings rate is going to go up to to get ready for the rainy day you think is coming. Instead what we saw last year was. Consumer consumption. Ran way ahead of the growth of household income. So I’m a little bit of a, I’m a little bit of a skeptic on this idea that the consumer confidence in China is very weak.