New York Times speculates on whether China economy will crash

UNDER the headline, "As China rises, fears grow on whether boom can endure", The York Times says that China's economic boom may turn into a bust, because of too much stimulus spending and a refusal to unpeg the rising yuan to the sinking dollar.

"China once could wave off complaints about its currency policies, arguing that it was a developing nation entitled to a bit of slack from its western customers. But with the world's fastest-growing economy - and more than US$2 trillion in foreign reserves - that argument looks increasingly untenable," said the report.

"At a time when you've got 10 per cent unemployment in the US and a very slow and gradual global recovery - and China seems to be skyrocketing - the pressure on the Chinese to change some of these policies, including the exchange-rate policy, is really going to grow this year," said Nicholas Consonery, a China analyst at Eurasia Group, a New York-based political risk research firm.

Since the global downturn started, China has spent $585 billion in stimulus and ordered state-run banks to double lending that created jobs for migrant factory workers and fuelled rises in the price of assets, like stocks and real estate, said the report.

"Some experts fear that too much of the stimulus money was put into unprofitable projects and bad loans. In that view, China's 2009 boom, in which automakers sold nearly 14 million cars and trucks, and housing prices doubled, is really a sign of an overheated economy at risk of serious recession down the road," said the report.

(Source: www.schednet.com)