This is China's biggest problem, expert says
CNBC
By Jacob Pramuk | CNBC – Tue, Jun 30, 2015 5:37 AM AEST
STR | AFP | Getty Images. The recent selloff in the Shanghai Composite reflects "horrible" underlying fundamentals in China, one economist said.
China's growth story is "basically over," and the country's recent stock battering reflects "horrible" fundamentals, one economist said Monday.
The biggest roadblock for the world's second-largest economy is dependency on exports to the United States and Europe, which face growth problems of their own, said Peter Navarro, an economics professor at the University of California, Irvine.
"China is going to be in a slow growth mode and that's going to continue until Europe and the United States recover," he said in a CNBC "Power Lunch" interview.
The Shanghai Composite Index (Shanghai Stock Exchange: .SSEC) has shed more than 20 percent since June 12. The drop comes on the heels of a torrid run for the index and China's central bank's continuing efforts to boost a slowing economy.
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The Shanghai Composite dropped more than 3 percent on Monday, but even with the sluggishness has nearly doubled in the last year. But the recent selloff fails to reflect markets with "really incredible potential," said Zachary Karabell, head of global strategy at Envestnet.
"I do not think you can use the Chinese equity markets as any proxy for domestic Chinese activity," he said Monday on "Power Lunch."
Karabell noted that domestic markets have rarely reflected underlying economic trends, as equities were previously sluggish during high growth periods.
Read More China's market woes not a global risk: Expert
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