FutureWire - futurism and emerging technology

Monday, July 31, 2006

A China Bubble Burst by 2009?

MSN Money financial editor Jim Jubak believes that China's economy is way overheated -- fueled by low interest rates, lots of high-risk borrowing and the government's inability to manage production -- and may crash as early as 2009. Naturally, because China has grown to become such a major player in the world economy, even a moderate recession would affect the global economy.

Some of the effects of an economic crash in China might be:

  • Massive unrest if widespread unemployment were the result, threatening the stability of the communist government, which is already struggling to maintain control.

  • If China were no longer perceived as a safe place to do business, short-term higher prices for goods could result... and could open up opportunities for China's global competitors. Long term, prices could fall once unrest settled down and if China were aggressive in getting back in the game.

  • A drop in China's consumption of oil, leading to lower prices on the world oil market -- perhaps even a crash. Good news for Western consumers; bad news for oil-producing countries (especially those in the volatile Mideast), which are currently enjoying the revenues generated by high oil prices.