Chi Lo

The answer is: not likely, as long as there is no premature monetary tightening. The reason is that the debt services burdens in both the US and the UK are still low.

A lack of reserve currency alternatives means there won't be a dollar crisis, but the greenback could stay weak throughout 2010 creating profitable trading opportunities.

The Fed's quantitative easing policy sets the stage for liquidity expansion and monetary easing in China, but will also result in lower returns on China's investments in US Treasuries.

While the Fed has embarked on an aggressive ôquantitative easingö policy, it is not yet printing money and the policy will not lead to inflation in the next two years.

The current crisis has more than a few similarities with the Asian financial crisis when it comes to causes and symptoms, and just like 10 years ago in Asia, the post-bubble adjustment in the developed world will take time.

Other concerns such as declining corporate profits, the collapse of A-share prices, a property bubble and unclear macroeconomic policies are valid, but should not be exaggerated.

With ChinaÆs economic growth rate set to drop and the central bank sticking to its anti-inflation policy stance, inflation is unlikely to get out of hand. But expect rate hikes in the months ahead.

Given that the fundamentals of listed Chinese companies are good, the long-term signs for the A-share market are also good.

Conflicting forces affecting inflation and growth will result in volatility and downside risks for Chinese stocks.

The US government's fiscal stimulus package is unlikely to work, which means it is up to the Fed to stablise the US economy - and the financial markets.