China meltdown: “Its impact could be the worst the world has ever seen.”

China meltdown scenario: World economy sent into a tailspin

OPINION/Daiwa Securities

“We have already stressed that the scenario discussed in the previous section is the optimum or bestcase scenario. What is just as likely or possibly more likely to occur is the following. If the expected growth rate declines and the progress of the capital stock adjustment causes the bad debt problem to become even more serious, the economy could spiral out of control, lapsing further into a meltdown situation. Of all the possible risk scenarios the meltdown scenario is, realistically speaking, the most likely to occur. It is actually a more realistic outcome than the capital stock adjustment scenario.

The point at which the capital stock adjustment is expected to hit bottom is at a much lower point than in the previously discussed capital stock adjustment scenario. . . [T]he actual economic growth rate will continue to register considerably negative performance. If China’s economy, the second largest in the world, twice the size of Japan’s, were to lapse into a meltdown situation such as this one, the effect would more than likely send the world economy into a tailspin. Its impact could be the worst the world has ever seen.“

From a report issued by Daiwa Securities, Japan’s second largest stock brokerage, titled “What Will Happen if China’s Economic Bubble Bursts?” (PDF link dated 9/10/15)