Danny Gabay'S Pessimistic Stance On China'S Economy Will Depreciate By 25% Yuan.

Economists in the former Bank of England predict that the central bank will eventually reduce its benchmark interest rate to near zero.

Danny Gabay, a former BOE economist, concluded that China, the world's second largest economy, is rapidly sliding to a hard landing. According to estimates from colleagues he and his colleagues at Fathom Financial Consulting Ltd., China's economic growth has dropped to around 3% this year, more than half of the official estimate of 6.9% in the first three quarters of this year and 6.5% of the government's five annual target level in the future.

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In the middle of 2014, China's government, business and household debt amounted to 2.82 times its annual economic output.

"In the prevention of

They will not be more brilliant than the rest of us in the bubble rupture, "Gabay said.

That means that the Chinese government has yet to make the last move, he said.

The Central Bank of China will eventually follow the same path of the west, lowering the benchmark interest rate from the current 4.35% to zero and start buying assets on a large scale.

The government will relax.

And try every means to provide support for banks.

With the sharp drop in interest rates, the central bank's main interest rate will be lower next year than the Fed's interest rate, which has never been seen since 2001.

The Central Bank of China has cut interest rates for the six time in a year and let the renminbi depreciate by 3% against the US dollar in August.

"They will move forward step by step in that direction," said Gabay, director and co founder of Fathom.

China needs to further devalue the renminbi. The depreciation rate in the next two years will probably be 2% to 3% per quarter, and it will stop after the accumulated depreciation rate is around 25%, because if it is further demoted, it will cause further damage to the economy.

"The rope in China is now on its neck, and they have to take it down or they will hurt themselves," Gabay said.

Fathom's view is totally different from that of Ma Jun, chief economist of the Central Bank of China.

Ma Jun said Tuesday that some market participants are too pessimistic about China's economy, and that the revival of real estate sales and recent fiscal and monetary stimulus measures should provide support for economic growth.

The central bank has repeatedly stressed that there is no need for quantitative easing.

Gabay's pessimism has its own arguments. It believes that China is not a special case, and its policy makers are not better equipped to stimulate the economy than others. China needs to learn from the practice of the United States and Britain to face the reality of excessive debt.