Stay Tuned To China

clipped from www.forbes.com And there is one more point: The state banks do not have to actually trigger a crisis to cause great damage to China's economy. Beijing will undoubtedly try to repair bank balance sheets by dropping both deposit and lending rates to abnormally low levels. This will create imbalances in the economy and, as Peking University's Michael Pettis argues, undermine efforts to stimulate consumption. Stimulating consumption is job one for Premier Wen, especially if the country cannot export its way out of the global downturn because the crisis is deeper and longer than expected. Beijing's technocrats, by engineering one of the greatest lending surges in history, are creating the condition for China's next banking crisis. So stay tuned.