Big investment bubble for China

[dArKeR]

By Joyce Huang
STAFF REPORTER
Friday, Apr 23, 2004,Page 10

Qu Hongbin, a senior economist with HSBC

China is expected to see the biggest investment bubble in the world since its fixed investment surged 43 percent in the first quarter after 26 percent growth last year, Qu Hongbin (???), a Hong Kong-based senior economist at HSBC, told a seminar in Taipei yesterday.

"China is now walking a tight-rope in balancing between the over-heated investment and rising hard-landing risk by implementing mild credit tightening measures ," Qu said.

In favor of soft-landing measures, China is unlikely to allow its currency to appreciate, which will negatively impact its export-oriented economy, Qu added.

http://www.taipeitimes.com/News/biz/archives/2004/04/23/2003137783

[physioex]

1. Their economy has been red hot for a few years...

There are many risks to this.

[dArKeR]

2. I'm a total bafoon. But wouldn't this be good news if it were Carlyle

or Fascist FOX? This would be the best news and reports which would make a stock go up 10,000%. Why is good news for a corporation bad news for a country?

[On the Road]

3. Overinvestment and Overcapacity Can Lead to a Bust, with

bankruptcies and recession if demand doesn't materialize. Depends on whether middle-class China's incomes keep rising and the US recovery is extended.

There are so many moving parts in macroeconomics it's hard to figure out what effect any individual things will have. But imbalances are usually bad. And 26% plus 43% growth in a number like this suggests a bubble.