So far during this global recession, Beijing has moved quickly to pump billions into the economy to keep it flowing. Their rescue plan was focused on modifying the export based economy into an inward looking economy while the global recession passes. To a large degree it's worked. Exports are down, obviously, but the government has managed to keep growth at a relatively high level though maybe not as high as required to keep up with the always heavy influx of new workers. Their own stimulus may be running out of gas and it's highly probably they will need to act again because it's wishful thinking to believe Western consumers will come back in the near term. China has the money to invest internally but still, it's a stress and a radical change from the export bubble economy.
With that background, now China may be looking at yet another bubble. A real estate bubble which of course, means problems for banks as well. Facing one bubble is challenging enough but another?
Wei Jianing, a senior researcher at the State Council Development & Research Centre, was quoted as saying that nearly half of China's newly created liquidity has been circulating in the financial system instead of flowing into the real economy to support growth, thus pushing up asset prices.
"There have already appeared some new early indications of asset price bubbles in China," Wei was quoted as telling a conference.
The newspaper also quoted Cheng Siwei, an influential former Chinese lawmaker, as saying that about 2.4 trillion yuan ($351 billion) of new lending in the first quarter of this year was used for investment purposes, including stock and property investment.
Main & gay blog