China should be cautious about the risk of a real estate bubble even though the country's overall economic condition is good, World Bank Chief Economist and Senior Vice President Justin Yifu Lin has said.
Lin said he is confident about the Chinese economy because of its healthy fiscal performance, abundant foreign exchange reserves and potential for growth.
The country has about USD 2.80 trillion foreign reserves. China must carefully study the cases of Japan and Ireland, where collapses of real estate bubbles after years of economic growth caused financial crises and economic stagnation, Lin told a symposium at Peking University yesterday.
A widening income gap has accompanied China's rapid economic growth because of enthusiastic investing, incompetent consumption and trade surpluses, state-run Xinhua news agency quoted him as saying. China is expected to sustain an 8-percent growth rate over the coming 20 years, he added.
The recovery has been unstable because of unemployment and low capacity utilization in developed countries, he said. Fiscal stimulus is more effective in dealing with such problems than currency measures, he said.