[ccebook.cn]The World in 2010

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Finance Blow, then burst Nov 13th 2009 China may be inflating the world’s next economic bubble A house of cards? You often don’t know about a bubble until it goes pop. But no country has ever puffed harder to inflate one than the Chinese authorities have done to ensure their economy does not collapse in the aftermath of the world financial crisis. As is always the case with bubbles, it is just a matter of time before they burst. In 2008 and early 2009, demand for products from China’s southern manufacturing belt dried up. Factories closed, and millions were fired. Managers of private factories in China complained bitterly about a lack of credit. Then, all change: state-controlled banks began a massive lending binge. In the first half of 2009, new bank lending was 50% more than all of 2008’s—in dollar terms, $1.1 trillion. The trillion-dollar question is: where did the money go, and what will it do? There are no clear answers. Deposits in Chinese banks grew sharply (suggesting some of the money went nowhere). But between 50% (according to a big Chinese bank) and 89% (according to McKinsey, a consultancy) of the stimulus money will be used for big infrastructure projects. Supporters of this spending make three points: dumping cash into an economy during a crisis can boost confidence and so growth; embarking on large projects when conditions are slow lessens unemployment; and the results may have indirect benefits since roads, railways, airports and wharves all help business. But there is an alternative view. The fast growth in deposits is hardly a sign of a genuine need for funds. And China’s banks have a suspect history. That their loans are politically driven does not mean that the loans will be bad, but it does raise the possibility that decisions had little to do with credit quality. -161- PA
Wrongly applied credit can slosh around, drive up costs and create excess capacity. If this happens, the first evidence may emerge at the end of 2010, if only because some disasters will become impossible to ignore. At the moment, China is drawing global praise for maintaining growth amid a global slump. It would be ironic if, in the process, it is creating its own eventual crisis. Thomas Easton: Asia business editor, The Economist Thomas Easton: Asia business editor, The Economist Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved. -162-
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Search Economist.com Welcome shiyi1
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From the editor Nov 13th 2009 The g
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Leaders The hard slog ahead Nov 13t
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Leaders Now for the long term Nov 1
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Leaders Europe's chance Nov 13th 20
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Leaders Not so fast Nov 13th 2009 R
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Leaders Chill, China Nov 13th 2009
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Leaders Smart states Nov 13th 2009
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Leaders Wanted: green engineers Nov
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Leaders More than a number Nov 13th
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United States Mr Obama's unpromisin
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United States Square-root reversal
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United States The Fed's next battle
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much of the asylum. Voters pass, fo
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Augustus. In America, the taxation
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Ms Rhee is reviled by many of those
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United States All the news that's f
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The Americas After Lula Nov 13th 20
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The Americas Bolívar's continent N
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The Americas Canada's northern goal
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The Americas Greenland, the new bon
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The Americas Sí, se puede Nov 13th
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Asia Bring on the new generation No
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Asia Political football Nov 13th 20
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Asia The cautious leap forward Nov
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Asia Peak labour Nov 13th 2009 Chin
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Asia The dragon still roars Nov 13t
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Asia An imperfect storm Nov 13th 20
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Asia Worryingly fragile Nov 13th 20
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Asia A grim prospect Nov 13th 2009
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Then there is the symbolic Kevin Ru
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this is accompanied by rising Islam
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To some of his critics, Mr Netanyah
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doomed sooner or later to fizzle, t
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and its surrounding Nineveh provinc
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(plastic trumpets). So Africa’s m
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Somalia would be little noticed wer
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slide backwards. Global financial i
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in June and South Korea in November
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Copyright © 2009 The Economist New
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As for rewriting nuclear rules, som
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affluent countries will have reserv
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International Delayed explosion Nov
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International Where survival is at
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Europe More than a museum? Nov 13th
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Europe Europe isn't working Nov 13t
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Europe Chameleon Bonaparte Nov 13th
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Europe Beyond the crisis Nov 13th 2
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Europe The eternal leader? Nov 13th
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Europe Coolissimo Nov 13th 2009 The
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Europe Changing the colours Nov 13t
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the centre-stage of unification, wh
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price would point to stagnation, a
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too: so long as the pipeline route
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Page 122 and 123: interrupted recoveries, largely bec
Page 124 and 125: Britain On yer bikes Nov 13th 2009
Page 126 and 127: Britain A history lesson Nov 13th 2
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Page 142 and 143: y far. But over-stretched American
Page 144 and 145: Business The plot thickens Nov 13th
Page 146 and 147: Business Can e-readers save newspap
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Page 150 and 151: Business Big SIS is watching you No
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Page 156 and 157: Business The end of the affair Nov
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Page 162 and 163: Finance In the wake of a crisis Nov
Page 166 and 167: Finance Looking for a way out Nov 1
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Page 174 and 175: days of easy pickings for hedge fun
Page 176 and 177: means that banks will take losses o
Page 178 and 179: liquefied natural gas (LNG). So int
Page 180 and 181: Policies to support supply-side ref
Page 182 and 183: Ocean Acoustic Waveguide Remote Sen
Page 186 and 187: A company called Arcadia Bioscience
Page 188 and 189: Science The looming crisis in human
Page 190 and 191: Science The coming alternatives Nov
Page 192 and 193: Science Where have all the sunspots
Page 194 and 195: to service the space station. The p
Page 196: making running repairs. The shuttle
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