Yet another warning sign on Chinese asset bubbles
Dated 17th July. This time by Forbes. Looks like the state government is not willing or able to do anything:
All bubbles burst, messily, so why don’t policymakers act now?
One reason, Sun said, is that many investment projects launched by the state will take three to five years to complete, requiring additional bank financing in 2010 and 2011.
“Therefore, a sudden and aggressive tightening would not only face substantial resistance from local governments, but may also delay the completion of some of the projects and bring immediate and unnecessary non-performing loan problems to banks,” he wrote.
So monetary conditions are likely to stay loose until 2012 or even later, he said.
One conspicuous source of liquidity is a renewed surge in China’s foreign exchange reserves, which jumped $177.9 billion in the second quarter to $2.13 trillion, the PBOC said on Wednesday.
The rise furnished evidence of a resumption of hot money inflows as foreign investors, lured by great big bubbles in the making, found ways of getting around China’s capital controls.