Caixin OnlineOpinionMagazine Columnist谢国忠 Andy Xie Underground Rumblings, then a Financial Quake
10.14.2011 14:52

Underground Rumblings, then a Financial Quake

Private, real economic activities are on shaky ground as high-rate loans, speculation and the state sector surge
By Andy Xie

A real business does not go bankrupt simply because it can't borrow money. But a money-burning speculator does.

This fact explains why it's wrong to blame the recent wave of private company bankruptcies in Wenzhou on China's monetary tightening and credit squeeze. The real story is that the companies speculated with borrowed money, and lost.

Excessive monetary expansion from 2008-'10 rewarded speculation through asset inflation. The Chinese government's economic stimulus, launched in the wake of the global financial crisis, fueled this growth.

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