China: Their Biggest Problem

The real fundamentals of the Chinese economy are much sounder than it is generally perceived.

Are there problems? Yes.

What is the cause of these problems? Their monetary policy. That is the biggest problem. It is too loose, their interest rates are too low, they are printing too much money.

Why are they doing that? Because they are trying to maintain their peg to the U.S. Dollar, they are trying to keep their currency down and when you do that you get bubbles. You get people looking for alternatives because they can`t get enough interest on their savings so they chase the real estate market, they chase the stock market, this is happening in China too.

But beneath the these bubbles is a legitimate economy that is producing, that is growing. You have savings, you have investment, you have real legitimate economic growth - something that is missing in the United States.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.