Subscribe to the BlogThe year 2009 belonged solely to China only because it was able to ride against the global crash, and march ahead quarter after quarter. It started with a 6% GDP growth in the first quarter and ended up with a spectacular 10.7% in the last quarter.
But all these happened only because the Chinese government kept on spending billions of dollars in developing many infrastructure projects. That in turn kept the demand for steel, cement and also labor very high. Even the laborers in the export sector who lost their jobs, started getting employment in social sector projects.
But in the recent past the property prices have been seeing a big surge due to investors putting in low cost funds into property market, for quick returns.
Now the Chinese government is putting the breaks on mad lending and has in fact asked three of the top five banks to stop further lending with immediate effect.
That is expected to force speculative investors to pull back their interest bearing investments into commodities and shares. That is precisely the reason behind the big crash in the Chinese markets in the last two weeks.
Given the history of crashes in countries relying on big stimulus spending over the last two decades, it is only logical to expect China to crash in a big way. It may happen either in 2010 or in 2011.