KKR says China is looking at anemic growth like Japan experienced in the 1990s unless the yuan falls

  • KKR cite China's debt dynamics, deflation, currency interventions draining reserves (& tightening liquidity)
  • "If it does choose to ignore these items, then we believe GDP growth could stagnate further the way it did in Japan during the 1990s (i.e., high real rates restrain growth amidst too much debt)."
  • KKR sees the fair value for yuan around 7 to the USD (i.e. around 7.1% than current rate)
  • USD/CNY could go to 7.5 on an 'overshoot'
  • Weaker yuan could lead to more instability in Asian contires (Japan, Singapore, South Korea cited)

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From a Tuesday note from KKR's Henry Mcvey, head of Global Macro & Asset Allocation team.

Via Bloomberg