As China rolls ahead, inflation & debt worries follow | business | Hindustan Times
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As China rolls ahead, inflation & debt worries follow

business Updated: Dec 13, 2010 23:09 IST

Agencies
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For nearly two years, China’s turbocharged economy has raced ahead with the aid of a huge government stimulus programme and aggressive lending by state-run banks.

But a growing number of economists now worry that China — the world’s fastest growing economy — could be stalled next year by soaring inflation, mounting government debt and asset bubbles.

Moody’s and Fitch say China is poised for growth, yet they have also warned about hidden risks in its banking system. Fitch even hinted at the possibility of another wave of nonperforming loans tied to the property market.

In the late 1990s and early this decade, the Chinese government was forced to bail out state-run banks because a soaring number of bad loans. Those banks are much stronger now, after a series of record public offerings.

But last week, an analyst at the Royal Bank of Scotland advised clients to hedge against the risk that a flood of cash into China could result in a “day of reckoning.”

And because China is a major holder of US Treasury debt and a global investment destination, any slowdown would hurt American companies and the world economy.

Aware of the risks, Beijing has moved recently to rein in soaring food and housing prices by raising interest rates and tightening regulations on property sales.

The New York Times

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