CanBubblesAlsoBeMadeinChina(翻译稿).docVIP

Can Bubbles Also Be Made in China? Mises Daily: Thursday, July 30, 2009 by Tim Swanson Despite all of the shimmering skyscrapers and industrial output, unless market forces are allowed to truly dictate economic exchanges, todays Chinese megacities and their residents will merely be facades and actors within a 21st-century Potemkin village, and growth will remain stagnant for years to come. This is due in large part to continual state intervention through centrally planned investment. Roughly eight months ago, Premier Wen Jiabao announced a $586 billion stimulus package to combat a plunge in economic activity. At the time, analysts such as James Pressler noted that the stimulus might simply be a rebranding of previously known spending packages rolled into a big fancy plan.[1] Suffice to say, this is not the case. I was wrong. Beginning in November, lending quotas have been scrapped and interest rates have been held at a four-year low: unsurprisingly, bank lending has surged.[2] According to the Peoples Bank of China, for the first six months of this year, new lending amounted to more than 7.3 trillion yuan (about $1.1 trillion) — which, according to the Royal Bank of Scotland, is equivalent to two years worth of credit. Furthermore, Wei Jianing estimates that roughly 20% of the stimulus funds have ended up in the domestic stock bourses, creating a speculative bubble much akin to the previous dotcom and housing-heavy cousins. Another 30% of the funds are believed to have been shuffled into the ailing property markets.[3] [4] In fact, residential property rates in places like Beijing are once again climbing at a spectacular rate — 6.5% in one week alone.[5] What was intended as a means to boost infrastructure improvements has been used instead to continue erecting villas and skyscrapers — with little productive value — in an already oversaturated market created by the previous boom. For example, at the end of last year, roughly 91 million square meters of apartment sp