Tuesday, August 18, 2009

The Chinese Bubble

China's GDP numbers 

Over the past few weeks there has been a lot of talk going around about the reliability of China's GDP numbers. Unfortunately for China, concerns have been cited with respect to the surge in its stockmarkets as well. As a result, Chinese officials intend to scrutinize gains in the stock prices in a bid to lend some stability to the market. As reported on Bloomberg, the benchmark Chinese index has surged 79% in 2009 with real estate prices also staging a comeback. This has raised concerns that loans actually given for infrastructure development are being diverted towards speculation in the stockmarkets. Vice Finance Minister Ding Xuedong has said that the government will monitor asset prices and create an internal mechanism to stabilize the stockmarket. However, we are not really sure how that will be achieved with so much liquidity sloshing around in the Chinese markets. Certainly, the government has a challenging job on its hands in terms of striking a balance between keeping an eye on the markets and not putting the brakes on economic growth.


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