World Bank fears fresh credit bubble in [Red] China on hot money flows

The Telegraph ^ | 12/19/2012 | Ambrose Evans-Pritchard

[bruinbirdman]

China and Asia’s tigers are roaring back to life and risk a fresh credit booms unless they can choke inflows of hot money, the World Bank has warned.

The Far East has shaken off the deep downturn earlier this year and looks poised to drive a fresh cycle of global growth in 2013. “China appears to have bottomed out,” said the Bank in its regional report.

Asia’s powerhouse economy will rebound with 8.4pc growth next year as credit stimulus and an infrastructure blitz by local governments gain traction, with knock-on effects through East Asia. The region as a whole will grow by 7.9pc, with Myanmar at last starting to catch up as undertakes “formidable reforms”.

The new risk is a return to overheating as ultra-loose monetary policies in the West trigger a “flood of capital into the region that could lead to asset bubbles and excessive credit growth” -- with the risk of sharp reversals later.

“Authorities should closely monitor developments on the capital account, especially in countries that have recently experienced rapid credit growth,” it said.

The Bank said Asian states should defend their economies from excess money printed by central banks in the US, Europe, and Japan by imposing short-term “capital controls” when needed. It added that exchange curbs are no substitute for “appropriate exchange rate arrangements” over the longer term, a criticism clearly directed at China’s dollar peg.

By holding down the yuan to boost exports China is in effect importing a US monetary policy that is far too loose for its own internal needs, creating inflationary “blow-back”.This may not have mattered after the Lehman crisis when the Politburo deliberately boosted credit by over 30pc a year, but it has now become malign.

Fitch Ratings said the balance sheets of Chinese lenders have exploded to $24 trillion

[DesertRhino]

Let me guess, if the Chinese currency was controlled by the IMF, London bankers, and the Fed, it would be a better world.

[PA Engineer]

China needs to keep inflating their credit bubble as an export economy trying to stimulate internal consumption. Population demographics are going to be the biggest pin prick in history. This will be the revenge of the one child policy.

[wiggen]

you know there was this fire in Bangladesh that killed over 100 people owned by a Chinese company. They set up there for lower wages. They have issues too that will only worsen.