The Change Mariner

Is China the Next Bubble?

New York Times:

But even by Chinese standards, things have been moving at a blistering pace of late. Official statistics, which the government tends to smooth so as not to indicate big booms or busts, show that the economy expanded 8.5 percent last year, despite the fact that growth came to a virtual halt during the second quarter because of an outbreak of SARS. According to independent economists, however, the Chinese economy actually expanded at an annual pace of 11 percent to 13 percent through the second half of last year.

Strains are already showing. Blackouts have become a problem in a majority of China's provinces, as families with new air-conditioners and refrigerators compete with new factories for electricity. Auto sales soared 75 percent last year, as prices in a market protected from imports until 2001 drifted down toward global levels. Still, automakers are planning huge factory expansions in the hope that such growth will continue. Most economists specializing in China now predict that sometime this year, growth will have to slow, at least for the investment side of the economy - the building of new factories, for example. That could prove painful. The United States economy suffered severe weakness on the investment side in 2001 and 2002, when the market for telecommunications equipment became glutted.