Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Bearish Roach Losing China Stimulus OptimismFrom The Financial Times:I've been an optimist on China. But I'm starting to worry Financial Times By Stephen Roach Published: July 29 2009 03:00 | Last updated: July 29 2009 03:00 On the surface, China appears to be leading the world from recession to recovery. After coming to a virtual standstill in late 2008, at least as measured quarter-to-quarter, economic growth accelerated sharply in spring 2009. A back-of-the envelope calculation suggests China may have accounted for as much as 2 percentage points of annualised growth in inflation-adjusted world output in the second quarter of 2009. With contractions moderating elsewhere, China's rebound may have been enough in and of itself to allow global gross domestic product to eke out a small positive gain for the first time since last summer. That's the good news. The bad news is that China's recent growth spurt comes at a steep price. Fearful that its recent economic short-fall would deepen, Chinese policymakers have opted for quantity over quality in setting macro-strategy, the centrepiece of which is an enormous surge in infrastructure spending funded by a burst of bank lending. Sure, developing nations always need more infrastructure. But China has taken this to extremes. Infrastructure expenditure (including Sichuan earthquake reconstruction) accounts for fully 72 per cent of China's recently enacted Rmb4,000bn ($585bn) stimulus. The government urged the banks to step up and fund the package. And they did. In the first six months of 2009, bank loans totalled Rmb7,400bn--three times the pace in the first half of 2008 and the strongest six-month lending surge on record. Read the rest of the article Labels: bailout, banking system, China, Emerging markets, financial crisis, infrastructure Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
