China's economy has been growing at a phenomenal pace in recent decades, averaging around 10% a year. Few people seemed to worry, therefore, when the Chinese government announced recently that gross domestic product (GDP) growth in the third quarter of 2011 slowed to "only" 9.1% . Almost any country would envy such growth. Yet beneath the continued robust appearances, there are signs that China is heading toward a crash reminiscent of the one that brought down the United States economy during 2007-2008.
China too is facing a real estate bubble financed by an unregulated shadow banking system that is just lately starting to get squeezed between tightening government regulation of credit and sharply falling export sales. If real estate prices finally start to tumble, the shock to bullish Chinese investors could collapse the shadow banking system, drive many smaller businesses under, and create severe unemployment problems.
Although the US Congress is still fixated on the supposed problem of an undervalued currency, a serious slowdown of the Chinese economy could have worse implications for the world economy than the much touted exchange rate issue.
Americans must start to think more broadly about the role of the Chinese economy in an increasingly troubled world economy and not consider only the bilateral US-China economic relationship in isolation from the rest of the world. Since 2007 the world economy has been rattled by a series of structural failures worse than any since the 1930s. This is a dangerous time.
http://www.atimes.com/atimes/China_Busi ... 3Cb01.htmlChina too is facing a real estate bubble financed by an unregulated shadow banking system that is just lately starting to get squeezed between tightening government regulation of credit and sharply falling export sales. If real estate prices finally start to tumble, the shock to bullish Chinese investors could collapse the shadow banking system, drive many smaller businesses under, and create severe unemployment problems.
Although the US Congress is still fixated on the supposed problem of an undervalued currency, a serious slowdown of the Chinese economy could have worse implications for the world economy than the much touted exchange rate issue.
Americans must start to think more broadly about the role of the Chinese economy in an increasingly troubled world economy and not consider only the bilateral US-China economic relationship in isolation from the rest of the world. Since 2007 the world economy has been rattled by a series of structural failures worse than any since the 1930s. This is a dangerous time.
