Rejected hard-landing doom, instead forecasting a “bumpy landing” as growth slowed but stabilized.

In the summer of 2015 and again in early 2016 a sharp correction of Chinese equities led to the concern that China – at a peak of a housing and investment bubble that had led to excessive debt and leverage – would face a hard landing with a recession and a financial crisis. US and global equity markets corrected sharply following the fall of Chinese equities as concerns about China’s hard landing dragging the global economy into a recession and crisis like the GFC mounted.

While the consensus among analysts and the market was that a hard landing of China was becoming the baseline scenario, Roubini took a more balanced and correct view.

He argued that China had enough policy tools as well as the low debt balance sheet of the central government to backstop the private (highly levered real estate and investment firms) and public actors (local governments and their financing vehicles) that were under financial stress. Thus, he argued that China would not face neither a hard landing, nor a soft landing: rather China will experience a bumpy landing.

Indeed, a China that had been growing close to 10% for three decades faced in the last decade a bumpy landing: growth slowed down from 10% to 7% right before the Covid crisis and 4-5% since the end of the Covid crisis. The deflation of the real estate bubble as well as the burden of high debt (over 300% of GDP between the private and public sector) have led to a slowdown of growth and financial stresses; but a bumpy rather than hard landing.

Again, Roubini proved right at the time when the conventional wisdom and consensus was shifting towards a view of a Chinese hard landing.