Uh-oh: China's Economy Is on the Brink, Too

Beijing fighting its own real estate bubble: Paul Krugman
By John Johnson,  Newser Staff
Posted Dec 19, 2011 10:39 AM CST
Residents pass protest banners on a street in Wukan, a village in the southern province of Guangdong. Residents are rebelling against the government over the seizure of property for developers.   (Getty Images)

(Newser) – Paul Krugman hopes he's being "needlessly alarmist," but most signs out of China point to an economy poised to crater, he writes in the New York Times. The main cause will sound familiar: a real estate bubble fueled by soaring prices, inflated credit, and a "shadow banking" system happy to cash in. And now that bubble looks ready to burst.

Some observers think Beijing has the smarts and the power to avoid the meltdowns that hit the US in 2007, and Japan before that in the 1980s. Those assurances sound a little Pollyanna-ish to Krugman. For instance, the news that China will now impose a tariff on some cars imported from the US, a move sure to "poison trade relations," doesn't "sound like a mature government that knows what it’s doing. ... It's impossible not to be worried," he writes. "China’s story just sounds too much like the crack-ups we’ve already seen elsewhere. And a world economy already suffering from the mess in Europe really, really doesn’t need a new epicenter of crisis." Read the full column here. (Or click here to read about how one small village is rebelling against a land grab for developers.)

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