The Bankwatch

Tracking the consumer evolution of financial services

China continues to display economic strain that will reflect on world economy

In the ‘how is the world doing’ category, this take (from the chairman of Morgan Stanley Asia and author of ‘The Next Asia’ (Wiley), due out in September) on China is consequential for us all. The west imported cheap labour from there for the 15 years preceding 2007, and the after effect is coming home to roost. What will matter to us all, and to banks, is the relative impacts on currency values as the historic imbalances are rebalanced to a different metric.

I have to keep going back to how banks in the west redesign their products and services. The old approach will not apply. Consumers problems reflected in high personal debt were the output of the crisis, and consumer reaction in the west and in China (where they are being laid off by the millions) will be a significant part of the nature of the recovery.

I’ve been an optimist on China. But I’m starting to worry | FT

This outsized bank-directed investment stimulus leaves little doubt as to how bad it was in China in late 2008 and early 2009. An unprecedented external demand shock, stemming from rare synchronous recessions in the developed world, devastated the export-led Chinese growth machine. That triggered sackings of more than 20m migrant workers in export-intensive Guangdong province. Long fixated on social stability, Beijing moved to arrest this deterioration. The government was determined to do whatever it took to restore rapid growth.

Written by Colin Henderson

July 29, 2009 at 14:43

Posted in Uncategorized

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