China not facing 'cataclysmic' economic slow down, says Stiglitz

China isn't facing a "cataclysmic" economic slow down and last week's market turmoil was more about badly designed stock market circuit breakers, said Nobel-prize-winning economist Joseph Stiglitz. 

PHOTO: BLOOMBERG

JAN 11, 201610:57 AM

[SHANGHAI] China isn't facing a "cataclysmic" economic slow down 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 seven per cent limit, weren't as well designed as they could be, said Mr Stiglitz, a professor 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 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 this 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 Mr 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.

BLOOMBERG