Himfr.com Reports Emerging Markets Face Risk Of Asset Bubbles: Chinese Economist
Emerging markets are facing a real risk of possible asset bubbles in the short run given the excessive liquidity in the international system, a well-known Chinese economist and central bank advisor said Wednesday.
Speaking at a real estate industry forum in Hong Kong, Fan Gang, director of the National Economics Research Institute, China Reform Foundation, said excessive liquidity in the global system, extremely low interest rates and devaluating pressure on the U.S. dollar were among the reasons for the emerging economies to be alert.
“For an economy like China, asset bubble is something very dangerous. That will cause an overall bubble … overheating in some other areas,” he said. Not only China, but all the emerging economies face the scenario of asset bubbles, Fan said, adding that policy makers should respond to such a risk.
There could be a rush of capital flows into the emerging markets, currently the places with promising growth prospects, he said. Fan said the prices for certain high-end real estate projects in China were “crazy.” He said inflation in the consumer price index will not be a risk in the foreseeable future due to widespread manufacturing overcapacity and the stabilized food prices.
Fan, a member of the monetary policy committee of the People’s Bank of China, said he expected the Chinese economic growth to be between 8 percent and 9 percent, followed by very optimistic growth prospects over the next decades.
Rebounds in real estate investment, corporate investment and exports could take over as the drives for the Chinese economy to grow after the stimulus effect fades. However, there could be a double-dip downturn for the United States economy, Fan said.
There were “signs of re-leveraging” but no progress on the called-for reforms. The toxic assets were still there and there could be further stocking adjustments, he said.
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