The False Economist

Tuesday, January 25, 2011

Irish Lessons for China ?

Clifford Coonan wrote an article in the Irish Times last Saturday discussing how the small, but growing, middle-class in China have pushed up the demand for luxury goods and are starting to turn their attention to property. Sound familiar ? The ramifications of an overheated Chinese economy and an ensuing burst property bubble would be disastrous for a world economy coming out of recession, even with a restrictive environment for foreign investment and a more regulated banking sector than, say, Ireland

However there are many reasons not to panic just yet. China's potential for growth is immense, some analysts have their annual growth rate at between six and nine percent for the next decade. Furthermore it is taking unprecedented measures to allow its currency to rise even if they are still far from what is required to have the yuan trading at a realistic value.

It's a good article and the comparisons with Ireland are quite poignant, showing how people in countries flush with easy credit and a booming economy can behave in such a similar manner.

Article available here

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