Chinese eco slow; policy move positive: Roach

Speaking about the Chinese economy Stephen Roach, Former Chairman of Morgan Stanley Asia said, "The Chinese economy slowed to 7.6% which is down a little more than 4 points from the growth rate of 2 years, when compared to the period of 2008-09. The Chinese economy has decelerated by over 8% age points. This is half the downshift and if the world implodes from here, China will be hit hard. But given the indications in US and Europe, where there is ongoing weakness, although it is nothing close to what we saw 3-4 years ago, I think we are near the bottom of China."

Roach on China's policy

"They are doing a lot, they are just not doing it the way you guys are used to looking at stimulus in the US. They have announced significant local government spending initiatives in a number of major cities and a number of provincial spending initiatives. When they have a problem, they use investment, they have a high investment share of GDP, but their overall stock of productive capital or worker is miniscule compared with richer, more developed economies. They have gone a long way to keep boosting investment, but they use it tactically for both cyclical & structural reasons."

Also read: Does history suggest China growth is about to rebound?

Roach on Chinese monetary easing policy

"They have done two monetary easing this year. I think they will do a couple more by the end of the year. They have done three reductions in RRRs in the banking system. I also think they will do more. But, they are looking not just at monetary policy as the tool to put a floor on China, but also looking at the mix of policy and they are easing fiscal policy, especially the investment initiatives. They are also easing the currency as a lever to put a floor under export competitiveness as well. So you have to look at the whole package."