China bubble fears spread in wake of rate rises
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In its Global Economic Prospects for 2010 the World Bank has joined those who predict an asset bubble may be emerging in China.
Earlier last week Ma Jiantang, the commissioner at the National Bureau of Statistics, announced China’s GDP had grown 8.7% in 2009 despite the downturn in the global economy.
However, while many take this as reflection of China’ economic stabilisation, others fear a recent spike in inflation and subsequent interest rate rises will result in hot money flows that would inflate an asset bubble. (article continues below)
Andrew Burns, the head of macroeconomic research at the World Bank, says he can see signs of a bubble emerging in China.
He says China’s low interest rates and “the particular nature” of its fiscal stimulus is “putting strains on the economy and forcing the government to step back”.
