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(Credit) Crunch Time

It is not all that long ago that the big credit crunch banks were being lambasted in some quarters for their plans to invest heavily in Chinese banks [1], and that at least one pundit was predicting “The Coming Collapse of China [2]”. How things change! Now it is the titans of Wall Street and the City that have faced collapse, and western government intervention that has saved (we hope!) the financial system. Today’s Telegraph carries a nice quote from Martin Sorrell, Chief Executive of WPP:

In the same year came this from, the Institutional Risk Analyst [6]:

We could go on…

Of course China’s system is not without risks of its own. Chinese banks, the government, and other investors have lost money at home and abroad during the global crash, there has been inflationary pressure, worry over export growth, and concerns over corporate governance and other issues remain. But sometimes the long-term view the Chinese government can afford to take, combined with the high level of control it still exerts over the economy, can provide (admittedly undemocratic) advantages not enjoyed in London or Washington (or Reykjavik [7]!).

SFGate [8] points to a Reuters article suggesting China, as it has avoided many of the problems, could be part of the solution:

So what action will China take? The always well-informed Caijing magazine has the following take on the situation:

China also took (what looks like rather clever) pre-emptive action to reduce its reliance on export-driven growth by developing domestic consumption. Whatever China does next, across a whole range of economic, investment and trade policies, a lot of people will take note.