Thursday, June 30, 2005

China- Bubble economy?

Manjit Bhatia, writing in Asia Times, considers that we can forget China's rosy economic scenario.

Bhatia reminds us there was an Asian economic crisis in the late 1990s.

In the mid- to late 1990s, 'Asia's economic castles were found to be built on sand. Their miracles were almost entirely debt-financed.'

Bhatia has some worries about the Chinese economy:

1. China has unreliable accounting and governance standards.

2. There is a great gap between rich and poor. 800 million rural dwellers suffer from low wages. Agricultural prices are declining. The Chinese who flee the countryside for better wages and living standards in China's coastal cities find 'their pot of gold is no more than an illusion'.

3. 'Without totalitarian state controls, China would have suffered a million labor-led mutinies by now'.

4. Provincial governments 'may be sitting on a growing mountain of debt that could easily rival the bad loans held by the state's banking sector.'

"A potentially horrendous debt crunch that could see millions of Chinese lose their jobs. That will unravel China's stable domestic order."

Manjit Bhatia is an academic and writer in Australia. He specializes in international economics and politics, with a focus on the Asia-Pacific region.

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