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Chins Has Its Own Systemic Market Problems Too October 21, 2008

Posted by tkcollier in Economy & Business, Geopolitics.
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At the heart of the crisis that toppled Lehman Brothers Holdings Inc. is an out-of-control system built on debt. At the heart of China’s problems is frantic development that also cuts corners to meet overambitious targets. The habits of both have huge implications, but aren’t easily changed because they are ingrained. The common dynamic is greed, meeting over-inflated goals, creative accounting and a sense of hubris.

Just as the credit crisis has shaken Wall Street to its core, safety concerns are a bigger problem for China than many realize. It’s one thing to fake DVDs and Prada bags. When a lack of regulation and oversight forces companies such as Unilever, Cadbury Plc and Japan’s Kanematsu Corp. to recall goods, China has a true dilemma on its hands.

A critical mass of China’s 1.3 billion people isn’t ready to create a domestic market. Nor can China easily find other export markets to offset Group of Seven economies. China can keep cutting rates, increasing infrastructure spending and tweaking taxes, yet that may not be enough.

The worst financial crisis since the Great Depression won’t leave China unscathed. If things get that bad, Chinese officials will have more to cry over than tainted milk.

via Bloomberg.com: Opinion

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