China After the Subprime Crisis: Opportunities in The New Economic Landscape

China After the Subprime Crisis: Opportunities in The New Economic Landscape

Language: English

Pages: 197


Format: PDF / Kindle (mobi) / ePub

This book analyzes the post-subprime crisis world from the global, Asian and Chinese perspectives. It dispels some of the myths about the crisis's effects on Asia and China; and exposes the ugly truth of bailout policies and their distortion and hindering of the world's economic rebalancing effort in the post-subprime era.


















investment, including infrastructure, post-earthquake reconstruction and public housing (Figure 2.6). In the post-subprime environment, China’s chronic excess manufacturing capacity problem may get worse, as a result of the explosive bank credit growth and capital spending that Beijing implemented in late 2008 and 2009 to fight the effects of the global credit quake. There is no doubt that the Chinese authorities’ stimulative policies have produced their 10.1057/9780230298965 - China After the

years, though they are still small in absolute terms (less than 1.5 per cent of GDP; see Figure 7.1). China’s overseas direct investment (ODI) has also created economic benefits for other developing economies. The subprime crisis will speed up China’s investment outflow trend in the coming years by lowering the cost of acquisition by Chinese companies, as global asset prices have dropped. China’s ODI is concentrated mainly in the developing countries. Recent United Nations research shows that in

pool is foreign ‘hot money’, which typically chases higher returns in China when its improving growth outlook drives rising asset prices. For example, speculative capital inflow5 to China surged to a record high in the second quarter of 2009 (Figure 7.3). This coincided with a sharp rebound in the Chinese stock market and property transaction, as investors/speculators bet that Beijing’s RMB4 trillion stimulus package, launched in late 2008, would be able to pull the Chinese economy out of the

statements are accurate. Indeed, this lack of qualified personnel is a general problem in China’s financial and accounting areas. If the current market inefficiency that creates excessive rewards for listing companies is not corrected, the IPO process will just create a strong incentive for business owners and venture capitalists to rush to list and then ‘take the money and run’. Further research will be needed to determine what effect this will have on the broader economy, but logically it

encouraging signs of fast consumption growth ahead (see Chapter 8), history has shown that the transition period will not be easy. Like the US and Japan during their export-reliant growth phases, China has not yet done enough to make that structural shift towards consumption become entrenched. These initial trends could still be reversed if Beijing loses structural reform momentum. This risk is especially prominent in the post-subprime adjustment years, because the global contraction stemming

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