Posted by: mulrickillion | November 21, 2011

China fears lasting worldwide recession

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By Jamil Anderlini, Nov 20, 2011 —

Wang Qishan, the Chinese vice-premier responsible for overseeing the financial sector, has predicted the global economy will slump into long-term recession and warned that China will need to deepen financial reforms to cope with the fallout.

“Right now the global economic situation is extremely serious and in a time of uncertainty the only thing we can be certain of is that the world economic recession caused by the international crisis will last a long time,” state media reported Mr Wang as saying over the weekend.

His unusually bearish comments could set the stage for domestic monetary loosening as Beijing frets about a deflating property bubble at home and chronic economic woes in China’s two largest export markets – Europe and the US.

They also reflect growing concern among policymakers that the country’s underdeveloped financial sector is facing heightened risks from a gathering economic slowdown.

Mr Wang said “some structural problems” exist in the country’s financial industry and Beijing needed to make monetary policy more “forward-looking, targeted and flexible”.

He said regional and rural banks and credit co-operatives should avoid “blind expansion and focus more on improving their efficiency and the quality of their development”.

China’s economy expanded 9.1 per cent in the third quarter, slower than 9.5 per cent in the second quarter but an enviable growth rate at a time when many countries are flirting with recession.

However, most analysts predict it will slow further in the coming months and many believe Beijing has already begun to soften its relatively tight monetary policy stance.

Growth in exports to key western markets is slowing and China’s overheated property market has recently seen a sharp fall in transactions, raising fears that housing construction, a key engine of growth, is running out of steam.

In late October, Chinese premier Wen Jiabao prompted speculation that loosening was imminent when he said the government intended to “fine tune” its tight monetary policies.

Because virtually all of China’s banks are owned by the state and their top executives are all senior Communist party officials, Beijing can adjust monetary policy without having to adjust interest rates or make any public policy shift at all. . . .

China fears lasting worldwide recession – FT.com

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