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China Faces Downside Risk From Overinvestment, S&P Report Says Feb 13 Product Image

China Faces Downside Risk From Overinvestment, S&P Report Says Feb 13

  • Published: February 2013
  • Region: China
  • Standard & Poors

Abstract
MELBOURNE (Standard & Poor's) Feb. 21, 2013--Investment levels in China have run ahead of returns on investment over the past five years, increasing the risk of an economic correction in the country, according to new report by Standard & Poor's Ratings Services. The report, titled "The Investment Overhang: Despite China's Rebound, US$800 Billion Of Downside Risk Abounds", examines the correlation between China's investment-to-GDP ratio and GDP growth during the 1990s to early-2000s, and explores a China downside scenario arising from overinvestment. It says that China's rate of return from its huge fixed capital investments appears to be diminishing compared to prior periods. "China's heavy dependence on fixed capital-led growth magnifies its economic sensitivity to a correction in investments," said Standard...

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Action: General Comment

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