By Shameem Adam from Singapore

    According to Nouriel Rubini, a professor at New York University who specializes in predicting financial crises, China's economy faces the risk of a "hard landing" after 2013 due to overcapacity caused by increased investment to fuel economic growth.
   
"China's economy is now increasingly dependent not only on exports but also on fixed investment."
    China's economy is now becoming more and more dependent not only on exports but also on fixed investment," said Roubini. Fixed investment as a share of GDP has reached about 50%, he continued: "If you continue to develop in this way, you will face two problems: huge non-performing loans in the banking system and a massive overcapacity that will lead to a hard landing.
    According to Fitch Ratings, the likelihood that China will face a banking crisis by mid-2013 is 60% due to the impact of record lending and rising housing prices. 2.7 trillion dollars in record lending over the past two years has pushed prices to unprecedented heights, despite the imposition of maximum housing price limits, increased down payment ratios, and restrictions on the purchase of second homes. The record $2.7 trillion in loans over the past two years has pushed housing prices to unprecedented heights.
    He pointed out that if the inflation problem worsened further, officials might take some administrative measures in addition to raising interest rates again and allowing the RMB to appreciate.
    The Shanghai Composite Index fell 0.8% this week and is down 3.7% since the beginning of the year, mostly due to concerns that tighter monetary policy may slow the economy. Australia's Bank of New Zealand Group Inc. said on June 10 that China may immediately order lenders to increase deposit reserves in order to suck more money out of the economy.

"Reduce fixed investment and savings and increase consumption, otherwise China's economy will have a hard landing after 2013".
    The policy challenge for China will be how to keep the economy growing 8% to 9% while keeping inflation lower than it is now," said Roubini, chairman and co-founder of Roubini Global Economic Consulting in New York.
    After next year, the bigger challenge is to "reduce fixed investment and savings and increase consumption, otherwise China's economy will have a hard landing after 2013".
    In the first four months of this year, fixed-asset investment rose by 25.4% year-on-year. China's trade surplus reached $13.1 billion in May this year, and rising imports mean that the country's demand may now be supporting global growth, but at the same time will increase the pressure to raise interest rates.
    China will be able to maintain an economic growth rate of about 9.5% over the next two years despite government measures to cool the real estate market and restrict bank lending, the International Monetary Fund said on June 9, adding that the country's consumer price index rose 5.3% year-on-year in April this year, exceeding its full-year target for the fourth consecutive month. In April, the consumer price index rose 5.3% year-on-year, exceeding the annual target for the fourth consecutive month.
    Since mid-October last year, this country, the fastest growing of the world's major economies, has raised interest rates four times in a row. Banks' deposit reserve ratios have reached a record 21% and the interest rate on one-year loans is 6.31%.
   
The world economy may be slowing down "too much".
 Speaking at a recent global investment conference in Singapore, Roubini said the global economy is likely to remain weak in the second half of the year, and that oil prices could rise by about 50% if the situation in the Middle East deteriorates further. high energy prices, data suggesting that the U.S. economy is stagnating, the European debt crisis remains unfinished, and Japan's economic recession have already undermined consumer confidence. The Morgan Stanley Capital International Global Index fell 4.7% this month.
 Roubini said there are increasing signs that the world economy may be slowing down "too much" and that the Fed is unlikely to boost economic growth by implementing a third round of quantitative easing unless the U.S. economy falls apart.
    He noted that the risk of 'outright' inflation and the likelihood of another recession in the US is lower now than it was a year ago. Roubini had successfully predicted a "catastrophic" global financial crisis in July 2006 that central banks were unable to prevent, and the collapse of Lehman Brothers in 2008 triggered the worst financial crisis since the 1930s. ★