Time to review the economic crisis

Lehman Brothers went bust a year ago, triggering the global economic crisis. It is time for us to review the causes and effects of the crisis, says an article in Yanzhao Metropolis Daily.

Compared to the United States and Europe, the global economic crisis has had relatively less effect on China. Besides, the government's $586-billion stimulus package and $1.07 trillion loans issued by banks have helped China achieve an economic growth of 7.1 percent.

But we cannot let our guard down. Is the rebound a signal of real economic recovery, or only the result of government investments? If so, what hidden dangers caused by the liquidity injection should we prepare in advance to cope with?

With a series of successful stimulus packages and hopefully an 8 percent annual growth, China has played an important role in leading the global economic recovery. Yet in the first half of the year, growth has been typically dependent on treasury investments and credit inputs, which means investment from the private sector hasn't been forthcoming.

On the other hand, the huge amount of liquidity being injected into the economy is likely to flow into stocks and the real-estate market, and thus push up prices. Take real estate for example. While the property market in Europe has lagged in growth and in the US it went from bad to worse in August, it has seen record-high prices in China since 2007 in a stark contrast to the slump in consumption.

We shouldn't forget the lessons the US has learnt from excessive dependence on real estate. The brains on Wall Street have created non-existent consumption by sanctioning substantial loans that change into economic bubbles. We should make every possible effort to prevent such a tragedy from striking in China.

(China Daily 09/18/2009 page9)