China is heading for a well needed crash

When I look at China it scares me - it brings back dark memories of July 1997. I was working as an analyst in an office above the Hard Rock Café in Kuala Lumpur. For months, investors had been fleeing the country in the wake of a devastating currency crisis. I had a front row seat during the total collapse of a major economy. It proved an invaluable lesson in the pitfalls of investing in Asia. I remember a stern statement sent to a leading tycoon to top up many millions of dollars as collateral or face immediate legal action; I remember the pulsating trading rooms emptying; I remember companies slamming the doors to investors as managements became preoccupied with a fight for survival. It was very unpleasant. OK, the traffic in the business district was definitely lighter for a few weeks – it was a lot easier to get home at night. But the troubling thing was just how quickly an economy can go into deep-freeze. And when you think about China today, that’s the episode that you need to bear in mind.