Pettis on why it is an important part of the negative self reinforcing cycle. He takes 'The Economist' to task on their China investment/debt analysis.
"The most worrying, but expected, fact was the amount of capital fleeing the afflicted countries. I cited an article in Spiegel that
claims that in the past year an amount equal to nearly 30% of Spain’s GDP had left the country. Flight capital is both a major result of declining credibility and a major cause of further declining credibility, and because it is so intensively reinforcing it is a major warning signal.
This matters for China for at least two reasons. First, a worsening Europe will make it harder than ever for China to rebalance growth away from investment, and second, China itself is experiencing capital flight."
That's what I said.
"The most worrying, but expected, fact was the amount of capital fleeing the afflicted countries. I cited an article in Spiegel that
claims that in the past year an amount equal to nearly 30% of Spain’s GDP had left the country. Flight capital is both a major result of declining credibility and a major cause of further declining credibility, and because it is so intensively reinforcing it is a major warning signal.
This matters for China for at least two reasons. First, a worsening Europe will make it harder than ever for China to rebalance growth away from investment, and second, China itself is experiencing capital flight."
That's what I said.
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