Monday, September 14, 2009

Humpty Dumpty Sat On a Wall...

Can China Keep It Up?

In a global recession? Hell no.

"Meanwhile, Beijing’s recent moves carry the seeds of future troubles. Stimulus spending contributes to overcapacity. There’s already a surfeit of highways, ports, airports and power plants. The country’s other big beneficiaries of government largesse—heavy industries such as steel, industrial-strength glass and aluminum—have spare capacity as well. The risks of deflation are rising.

Any unprofitable projects will cause nonperforming loans to mushroom. If that weren’t enough, much of the new liquidity flowing through the system is sloshing into property and stock markets. That could easily create bubbles, which, when burst, would saddle Chinese banks with even more bad debt. State banks may require a second massive bailout, just a few years after the first, to stay afloat."

Propety bubbles? Bad debt? Massive bank bailouts? I thought we were talking about China...

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