Saturday, October 24, 2009

The Biggest Bubble of Them All

China needs an “urgent” tightening of monetary policy to prevent the huge stimulus measures introduced this year from inflating stock and property bubbles, one of the country’s leading bankers has warned.

Qin Xiao – chairman of China Merchants Bank, the country’s sixth-biggest – says in Thursday’s Financial Times that the government should not be afraid of a “moderate slowdown” in the economy...

...Tomo Kinoshita, an economist at Nomura International, said in a report on Wednesday that China risked creating an asset bubble similar to Japan’s in the 1980s if it continued with aggressive lending at the same time as deregulating its financial markets.
1"Top China banker warns on asset bubbles" - Financial Times; Dyer


What will be the internal reaction when the bubble collapses ? (While also noting that bubbles can go on a very long time.)

This sentence from Qin Xiao's article is interesting, in light of Wu Jinglian's recent warning about the increasing power of centralization tendencies: "However, there is growing concern, especially in China, that the temporary stimulus programme might evolve into permanent government control of the economy".

2"China must keep its eyes fixed on the exit" - Financial Times, Qin Xiao
3"'Maoists' Gaining Influence in China's Government ?" - Previous Post

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