chinas-recovery-is-a-bubble

ChinaÆs recovery is a bubble

FinanceAsia readers fear that ChinaÆs economic recovery is masking an asset price bubble.
Locals rush to buy real estate in Qingdao in December, contributing to the fast rise in property prices
Locals rush to buy real estate in Qingdao in December, contributing to the fast rise in property prices

Higher asset prices and rising inflation have prompted China's central bank to rein in bank lending and keep its economic recovery on track, but respondents to a FinanceAsia poll are unconvinced.

Almost half those who answered the poll said that China's economy is already experiencing a bubble. Central bankers are clearly worried too, after banks hit close to 20% of their annual lending targets in January alone and property prices rose at their fastest level since the first half of 2008. On Friday last week, the People's Bank of China announced that the reserve requirement ratio for banks will be increased by 50bp to 16.5% for major banks from February 25 -- the second upward adjustment to the reserve requirement this year.

Out of a total of 132 votes, 49% said China's economy is bubbling, while 32% said it is recovering, 13% said it was somewhere between recovery and a bubble, and 5% were not sure.

Photo provided by Imaginechina.

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