Saturday, June 13, 2009


Is China starting to implement the same dangerous strategy as the United States or Europe ten years ago: Bolster growth by credit?

From the mid-1990s onwards, the United States and Europe have offset the low spontaneous level of incomes by using credit. Currently, growth is picking up in China, while there is a pronounced upturn in credit. Is China using the same technique as the United States and Europe, which led to the current financial crisis?

We need to ascertain whether:
− credit has indeed jump-started Chinese growth?
− in the medium term, China will not have any other source of growth than credit?

We believe China’s potential, structural, growth will remain strong without any excessive borrowing, and the risk of a financial crisis, such as the one that has recently been witnessed in the United States and in Europe, is accordingly not to be feared in China, even though an increase in nonperforming loans is likely.

To see full report: FLASH ECONOMICS