Bubble Trouble

Those enthusiasts about China’s perky economy should heed the warnings of Premier Wen Jiabao on the dangers of overinvestment producing another economic bubble, writes The Washington Post’s David Ignatius. China watchers need to look more closely as its biggest problem is that its growth is unstable, Wen cautioned during a press conference two years ago. Last week he echoed these sentiments again, saying “We still face a very complex situation,” in reference to what Ignatius calls “the twin dangers of overheating at home and the global recession abroad”. He continues: “The rise of China is one of the blessed miracles of modern economic history. But Chinese leaders know they cannot repeal the economic laws of gravity. As the economist Herbert Stein observed decades ago, ‘”If something is ‘unsustainable,’ that means it won’t be sustained.’ That is surely true with the unbalanced, export-led growth that has powered China’s ascent.”