Former Federal Reserve Chairman Ben Bernanke reportedly struck an upbeat note about China during a question-and-answer session at Tuesday’s Asian Financial Forum in Hong Kong.

Bernanke at Asian Financial Forum
Bernanke at Asian Financial Forum

In response to questions from reporters, the usually guarded former US monetary chief said the global economy faced larger problems than China’s current economic slowdown.

“I don’t think China’s economic slowdown is that severe to threaten the global economy,” Bernanke said.

Though he made his comments on a day that China posted its lowest GDP growth in 25 years, Bernanke went on to say that China’s government is making good progress in shifting to a consumption-based economy with a larger service sector.

He added that international investors likely overreacted to China’s problems and will have to adjust to take into account slower Chinese economic growth. With productivity generally growing slowly worldwide, Bernanke noted that investors shouldn’t expect 10-12% gains from Chinese stocks annually. He said 4% a year was a more realistic expectation.

On the minus side, the ex-Fed chairman expressed worries that the People’s Bank of China is becoming less transparent, particularly with respect to managing the yuan. Bernanke opined that when central banks have transparent policies and send clear policy signals, the markets will cooperate by doing their work for them.

Leave a comment

Your email address will not be published. Required fields are marked *