Editorial

摘要

Three years ago, we flew from Shanghai on a trip to the Yellow Mountain, a little over 300 kms west of the city. The plane landed an hour or so later at a small airport in a fairly rural part of Anhui province in the area of Huangshan, a couple of hours drive from the mountainous landscape that we were visiting. We were met by a translator who could speak perfect English but had never been out of China and rarely out of the region itself. As we drove towards the granite peaks, the first village we encountered was dominated by grey forbidding-looking high-rise towers, some 30 stories in height, arranged in serried ranks along the highway. A year ago after my trip to Wuhan, I wrote in this journal about the property bubble in China (Batty, 2014), referring to the fact that after the Credit Crunch in 2007-2008, China reflated its economy through massive lending, which went largely to build infrastructure such as the kind of housing we encountered. I referred then to Robert Peston's (2014) incisive documentary on the scale of this investment and all the worry it might bring if the Chinese economy slows with demand for its products declining worldwide. Another credit crunch of the kind seen in the west nearly a decade ago but of a different genesis will then be upon us. With this debt now rising at 15% of GDP each year and with the proportion of such debt already more than 200% of GDP (Xie and Cao, 2015), the consequences for China and the world economy could be dire. Peston (2015) has more recently followed up his documentary with another article, where he recounts that slowing growth in China now looks as though it could spark such a bust as credit is squeezed and debts are called in. Interestingly, the Chinese government has chosen in fact to lower interest rates which would appear to be akin to keeping the boom alive, with all the predictions that the crash will be so much greater once it happens. Of course, the notion of a crash is extremely controversial with bankers and government alike arguing that China is the first country, perhaps the only country ever, to defy or to be able to defy the laws of financial gravity!