There’s no free lunch in China-unless household is willing to pay for it

April 9, 2010 at 11:13 am Leave a comment

Michael Pettis wrote a wonderful article on bad debts accumulating in China and who has to pay for it in the end in order to prevent bank collapse.

Here what he summarise:”It turns out that banking crises might not be costless, even if they don’t lead to banking collapses. In the case of China they may instead lead to a collapse in consumption growth. As part of the trade dispute that China is facing with the rest of the world, this should give some indication of how little room China has for its adjustment. Anyone who is too impatient with the glacial pace of Chinese adjustment must recognize just how difficult it will be for China quickly to reorient its economy towards household consumption. The risk is that China, like Japan in the 1990s, will rebalance in the form of a sharp contraction in GDP growth as households struggle to pay for the misallocated lending boom.”

To read more(caution:it is long),
Who Will Pay for China’s Bad Loans?
http://www.roubini.com/asia-monitor/258683/who_will_pay_for_china___s_bad_loans_

Entry filed under: Watch your step. Tags: .

A bank run on Greece? How to reduce risk on Wall Street? Make the banks pay

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Recent Posts

April 2010
M T W T F S S
« Mar   May »
 1234
567891011
12131415161718
19202122232425
2627282930  

Archives

Blog Stats

  • 37,456 hits

%d bloggers like this: