Chinese Slow Down to Have a Major Impact on the World

One of the problems are �wealth management products� which the banks have set up as Ponzi schemes, offering high rates of return, but financing them not through investment but through the funds of new investors, Rickards said.

�How long could that go on. It will go on until something happens. There�s a failure, a fraud, something will cause a panic and everyone is going to run down and try to cash them in,� he said.

�They�ve set themselves up through wasted infrastructure investment, opaque financial product and ponzi financing � they�ve set themselves up for a collapse,� he added.

If China experiences a softer landing, it will have to be happy with growth of closer to four per cent, Rickards estimated. But if it faces a crash, or a bank default, growth may decline to two per cent.

�The world is not ready for this. China is 10 per cent of global GDP. If you take Chinese growth rates down from 7-7.5 per cent even to 4.5 per cent, let alone 2.5 per cent, which is possible, that�s going to have a major impact on the entire world,� he said.

- Source, CBC:

http://www.cbc.ca/news/business/slowing-chinese-gdp-growth-worries-investors-1.2559940