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BIZCHINA / Center |
Economist: China can evade US subprime debt crisisBy Hao Zhou (chinadaily.com.cn)
Updated: 2007-09-18 16:19 The subprime mortgage crisis in the United States has had limited impact on China's economic entity, and China can evade related consequences, according to two renowned Chinese economists, the Shanghai Securities News reported today. Wang Qing, chief economist of Morgan Stanley's Asia-Pacific region, believes the Chinese economy will not slow even if the US suffers an economic retreat. In a public statement yesterday, former US Federal Reserve's Chairman Alan Greenspan warned of the possibility of a recession in the US economy amid significant inflationary pressures sparked by snowballing housing prices. Wang cited a ratio between government debts and gross domestic product of 18 percent in China, compared with the prevailing 40 to 50 percent in newly industrialized countries. The figure indicates that China has enough room for further expansion of financial policies. Meanwhile, the great bulk of forex reserve will help China to counterbalance external risks. Soaring investment in fixed assets will fuel rapid Chinese economic growth at least another 10 to 15 years, Wang claimed. Another Chinese economist, Gao Ting, deputy general manager of China International Capital Corp Ltd's research department, also showed little concern over the Chinese stock market's liquidity, as long as the bad subprime debts problem remains confined to the financial field. Gao said there are some ways to relieve the impact of US' subprime mortgage crisis. The US Fed and other nations' central banks will make efforts to prevent the crisis from spreading, either by injecting money into the markets or by elevating interest rates. Additionally, upgrades to China's own export structure will make the country more flexible in front of a demand shift in the foreign market. And China is also capable to stimulate the domestic demand via proper financial measures. Today, the US Federal Reserve policymaking board plans to meet and consider a rate cut of an expected quarter of a percentage point, to 5 percent. Later this week the major US investment banks, including Bear Stearns, Lehman Brothers, Morgan Stanley and Goldman Sachs, are to report their third-quarter fiscal results. Losses from the bad subprime mortgage loans will be public.
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