This China decoupling thing was never really going to take off, was it?
From Bloomberg:
China’s economy is highly likely to slow next year and efforts to spur growth will be constrained by inflation and government debt burdens, said Wu Xiaoling, a former deputy central bank governor.
The government shouldn’t expand monetary or fiscal stimulus because of price pressures and central and local-government debt, Wu said in comments published today by the Financial News, the central bank’s newspaper. Wu is vice director of the finance and economy committee of the National People’s Congress.
And property prices continue to rise in spite of the government’s attempts to dampen them down. Even state-controlled media admit local government desperation for revenue has been to blame:
Analysts said that the central government’s efforts to control property prices have not been fully effective due to a number of complex factors, including unwillingness by local governments to adopt stricter measures.
Then you have Cheng Siwei, a former deputy speaker of the People’s Congress, now head of the International Finance Forum Beijing, likening local government loans to the US subprime fiasco at the WEF Dalian conference last week:
“The tightening policy is creating a lot of difficulties for local governments trying to repay debt, and is causing defaults,” he told a meeting at the World Economic Forum in Dalian.
…
Mr Cheng said China is entering a “very tough period” as growth runs into the inflation buffers, threatening the sort of incipient stagflation seen in the West in the 1970s and leaving the central bank with an unpleasant choice.
Fun times ahead.
Related links:
Inter-company, intra-state Chinese lending – FT Alphaville
China’s stagflation question - FT Alphaville
Lex: China’s growth and prices puzzle – FT