{"id":1622,"date":"2015-05-21T10:38:58","date_gmt":"2015-05-21T09:38:58","guid":{"rendered":"https:\/\/blog.iese.edu\/economics\/?p=1622"},"modified":"2015-05-21T10:38:58","modified_gmt":"2015-05-21T09:38:58","slug":"will-chinas-bubble-burst","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/economics\/2015\/05\/21\/will-chinas-bubble-burst\/","title":{"rendered":"Will China\u2019s Bubble Burst?"},"content":{"rendered":"
\"Shanghai<\/a>
Shanghai Pudong Panorama Jan 2 2014. Author: Yhz1221<\/figcaption><\/figure>\n

Some economists are debating about China\u2019s economic bubble: not about whether the bubble exists (they concur on that point), but WHEN and HOW it will burst.\u00a0<\/strong><\/p>\n

In your opinion, does this threat really exist? And what are the main risks for the international economy posed by the current situation of the Chinese economy?<\/strong><\/strong><\/p>\n

 <\/p>\n

\"AlfredoAlfredo Pastor<\/a>
\n<\/strong><\/p>\n

The bubbles can be seen from here: they are the result of efforts to compensate for the drop in exports stemming from the global slowdown. First, a real estate bubble. Then a stock market bubble to prevent a rough landing for real estate.<\/p>\n

The People\u2019s Bank of China has lowered the reserve ratio to help; meanwhile the stock exchange authorities have tightened margin requirements. Informed local opinion says the bubbles won\u2019t last until 2016.\u00a0When a slowdown finally does occur, the suppliers of China’s oil and\u00a0equipment will see their source lists dwindle. As will China’s neighbors,\u00a0who provide cheap labor and manufacturing. Others, not quite as much.<\/p>\n

\n

\"2010-Rolf-Campos_06_20120720130243_20130130163424\"Rolf Campos<\/a><\/strong><\/p>\n

There certainly is concern that bubbles exist in Chinese markets. Generally speaking, it is not easy to predict when a bubble is going to burst. This is even harder in the case of China since we do not have good, real-time information on the economy in comparison to advanced countries.<\/p>\n

The effect of a slowdown in China would be felt by emerging countries exporting energy and mineral and agricultural commodities to China. It would hurt the most where weaknesses already exist. Several emerging countries in Latin America are already running current account deficits and there is worry that a liftoff in US interest rates could strain the balance of payments, and affect real activity in that region. A slowdown in China would add to these problems and complicate the situation in that region of the world.<\/p>\n

\n

\"JavierJavier D\u00edaz-Gim\u00e9nez<\/a><\/strong>
\n<\/b><\/p>\n

I am not too worried about China\u2019s economic future. In the last 30 years or so, it has proven to be extremely successful in walking the arduous path toward\u00a0development:\u00a0export-based growth, record-breaking\u00a0rates of investment and a massive accumulation of foreign reserves.<\/p>\n

Compared to the feats that its\u00a0authorities have achieved already (hypothetical bubbles\u00a0notwithstanding), shifting toward a growth strategy based on the development of its internal\u00a0market seems relatively easy\u2014and a move that will surely garner widespread popular support.<\/p>\n","protected":false},"excerpt":{"rendered":"

Some economists are debating about China\u2019s economic bubble: not about whether the bubble exists (they concur on that point), but WHEN and HOW it will burst.\u00a0 In your opinion, does this threat really exist? And what are the main risks for the international economy posed by the current situation of the Chinese economy?   Alfredo […]<\/p>\n","protected":false},"author":689,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[759,87340],"tags":[182,90828,90831],"class_list":["post-1622","post","type-post","status-publish","format-standard","hentry","category-global-economy","category-quick-question","tag-china","tag-crisis","tag-global-economy","megacategoria-mc-economics"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t