Posted by: mulrickillion | March 2, 2012

China is right to open up slowly

By Martin Wolf, Feb 28, 2012 —

The next big global financial crisis will emanate from China. That is not a firm prediction. But few countries have avoided crises after financial liberalisation and global integration. Think of the US in the 1930s, Japan and Sweden in the early 1990s, Mexico and South Korea in the later 1990s and the US, UK and much of the eurozone now. Financial crises afflict every kind of country. As Carmen Reinhart of the Peterson Institute for International Economics and Kenneth Rogoff of Harvard have remarked, they are “an equal opportunity menace”. Would China be different? Only if Chinese policymakers retain their caution.

Such caution permeated last week’s report that the People’s Bank of China has recommended accelerated opening up of the Chinese financial system. Given what is at stake, in both China and the world, it is essential to consider the implications. . . .

China is right to open up slowly – FT.com

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Responses

  1. Not sure I agree with the analysis, it’s flawed to assume that all economies follow the same peak/bottom patterns – slow and steady may offer no benefit other than a longer decelerative curve when the bottom drops out…

    • I understand your point, but maybe China presents a unique situation or even perhaps an anomaly in world trade. Yes, China is the big power house in Asia, and depending on whom you are talking to, it is either a market economy or non-market economy. I say that to preference that China is struggling with economic development issues, socio-political issues, a housing bubble, inflation, and a host of other issues, including the global finance crisis, though it seem to fare better than many other countries in its management of the crisis.

      In other words, chaos rather than stability could conceivably be the outcome of an abandonment of a “gradualist approach” to economic development. The alternative of what many economists refer to as a “big-bang” approach might both disrupt its economic momentum and even that of developed economies such as the United States and EU. You could say that it is a consequence of globalization and its inevitable economic integration.

      With that being said, as usual, for my friend this is simply fodder for thought; and thank you for your comment.

  2. Very insightful – thanks.
    yours,
    Bill Foster

    • Yes, I absolutely agree that Wolf’s article is a good read, because, typically, his observations on the Chinese economy are forward thinking and go straight to the gist of the problems. Moreover, thank you for stopping by.

      • You are welcome. Keep the great posts coming.
        yours,
        Bill

      • Thank you, and I also enjoy your web postings, because they are very informative and well done.


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