November 21st, 2011
Econintersect: Japan is already seeing exports decline, Singapore expects a sharp contraction in 2012 and China fears a long-term global recession. These are breaking news stories from the Far East Sunday (November 20). One week ago the IMF issued a 74-page report warning about problems in China’s financial system (EconMatters), and that backdrop just adds more uncertainty to the situation.
Some of the official thoughts from the Chinese government about the uncertain outlook were reported in the Financial Times:
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.
Wang also referred to concerns about some “structural problems” in China’s financial sector. China has recently been tightening monetary policy to fight inflation and that appears to have precipitated a deflation of the county’s real estate bubble as property values have fallen in recent months, causing Nomura Securities to say November 20 that the property market has reached a “tipping point” (Bloomberg/Businessweek). Two weeks ago, Gordon Chang wrote for Forbes that China has some areas with precipitous price declines and this could be a residential real estate crash.
However, a recent GEI News article reported that Chinese inflation appears to be easing. That may give the government the opportunity to start easing.
An article early Monday (November 21) in the Shanghai Daily disputes any economic problems in China, pointing out that GDP growth continues to outpace the rest of the world.