Sunday, July 24, 2005

$711 billion in reserves

Safe Haven | Those Clever Chinese.
"The issue of surplus capacity has become very worrying for policy makers in Beijing also, because there is no pricing power and, therefore, there will be an impact on the financial sector. Every company will need a piece of the same pie. Prices will fall even more. Companies will need more loans to survive and so on. The deflation story, so frightening to Greenspan, will grow into a live problem in China. Even with rising demand, prices continue to fall because of this chronic surplus capacity. There is a risk of a large knock-on impact on the financial sector, less on the big banks, but more focused on the local and regional banks and money co-operatives, of which there are about 120 of the former and 30,000 of the latter category.
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