China not facing 'cataclysmic' economic slowdown, says Nobel laureate Joseph Stiglitz

Professor Joseph Stiglitz from Columbia University speaking at a talk for Bank of Singapore clients on Oct 10, 2014.
Professor Joseph Stiglitz from Columbia University speaking at a talk for Bank of Singapore clients on Oct 10, 2014. PHOTO: BANK OF SINGAPORE

BEIJING (BLOOMBERG) - China isn't facing a "cataclysmic" economic slowdown and last week's market turmoil was more about badly designed stock market circuit breakers, said Nobel Prize-winning economist Joseph Stiglitz.

The circuit breakers, which caused local stock exchanges to close early on two days last week after stocks plunged to a 7 per cent limit, were not as well designed as they could be, said Professor Stiglitz, who teaches at Columbia University in New York, speaking in a Bloomberg Television interview in Shanghai.

The market closures and lower daily fixing rates for the nation's currency against the US dollar roiled global markets, heightening anxiety that it could presage a deeper slump with growth already at a 25-year low in 2015. The Shanghai Composite Index slid again on Monday (Jan 11) morning, pushing its decline in 2016 to 11 per cent.

 

"There's always been a gap between what's happening in the real economy and financial markets," said Prof Stiglitz. "What's happening in China is a slowdown by all accounts. It's a slow process of slowing down. But it's not a cataclysmic" slowdown.

Regulators said last week the circuit breakers rule exacerbated rather than calmed the stock market panic and scrapped it on Thursday.