China to Switch Off Bubble-Blowing Machine? → Washingtons Blog
China to Switch Off Bubble-Blowing Machine? - Washingtons Blog

Wednesday, July 8, 2009

China to Switch Off Bubble-Blowing Machine?

As noted previously, China experts say that the Chinese government has been blowing a huge bubble (and see this).

But the government is apparently going to switch off the bubble-blowing machine.

China expert Michael Pettis writes:

Today bank stocks were down, on rumors that the very high and clearly unsustainable loan growth rates would soon come to an end.

And the BBC writes:

It comes as the government looks to tighten its monetary policy to prevent the risk of asset bubbles, loan defaults and rapid inflation.

Meanwhile, the Chinese city of Hangzhou has started tightening mortgage lending terms, ahead of any changes to monetary and credit policies by the national government.

The signs that China may ditch its loose monetary policy dragged down bank stocks in Hong Kong and Shanghai on Wednesday.

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