Premier Wen Jiabao warned of “latent risk” in China’s banks and pledged to crack down on property speculation in a speech in Beijing to the National People’s Congress, similar to the U.S. State of the Union address.
The chinese government faces the consequences of flooding the economy with money to drive growth and also faces excess capacity in manufacturing and weak support for rural-income growth:
“The domestic economy still faces some prominent problems” and he added “Latent risks in the banking and public-finance sectors are increasing”
Harvard University Professor Kenneth Rogoff has said growth could slide to 2% from Wen’s 8% target within the next 10 years as a debt-fueled bubble collapses, and Victor Shih of Northwestern University sees risk of a crisis in 2012.
These concerns are also expressed by hedge fund manager Jim Chanos, and international investor and market commentator Marc Faber. Former John Paulson’s right hand man at Paulson and Co., Paolo Pellegrini also has some concerns about the chinese real estate as he recently wrote, “I was in China late last year. One particularly enlightening meeting was with the top official of a major bank, who pointed to all the empty office buildings surrounding his own, observing that his country’s stimulus money would have been better spent paying people to stay home”
Related stocks and ETF`s: iShares FTSE/Xinhua China 25 Index (ETF) (NYSE:FXI) , China Mobile Ltd. (ADR) (NYSE:CHL) , China Life Insurance Company Ltd. (ADR) (NYSE:LFC)
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