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China is building capacity and infrastructure(roads/rail roads/airports) for its future internal growth as well as for external growth(factories/production facilities). At worst case, China will not be hit as hard as the rest of the world, as at least there is domestic consumption to turn to. Don't worry about high investment ratio in GDP, eventually, all investment will turn into consumption one way or another as long as it is not waste. (Don't dig a hole then bury it, that's pure waste, so called wealth transfer). Without a doubt, the world needs China's export. So far, there has not been a country to displace China yet. Not Indonesia/Vietnam/Philippines/Myanmar/India/Bangladeshi etc, at least not yet.
It's a great opportunity for China to remodel its economy, to improve the efficiency of capital investment and to improve domestic consumption.
Shadow banking is not that serious a problem. Subprime crisis, if you really think hard, is a problem of shadow banking running out of control. The credit that supported subprime is not necessarily from the commercial banking system, but from all kinds of investors in money market funds, private equity funds, pension funds, and all other financial products. The commercial banks and other mortgage originators originated the mortgages, sold it to investment banks, which then packaged it to various financial products, sold to investors I mentioned before. The amount left in the commercial banks was not big, otherwise, we should say banks such as JP Morgan/Wells Fargo/Bank of America to fall, other than Bear Stearn, Lehman Brothers, Merrill Lynch, etc, instead, we only see small commercial banks took a hit as they did not sell their mortgages to investment banks but retained them. The other huge loss are taken by pension funds, money market funds and other financial product investors.
Lucky for China, they have a precedence fresh in their minds about controlling shadow banking system. The shadow banking system in China is controllable. But the rich could get a haircut.
It's a great opportunity for China to remodel its economy, to improve the efficiency of capital investment and to improve domestic consumption.
Shadow banking is not that serious a problem. Subprime crisis, if you really think hard, is a problem of shadow banking running out of control. The credit that supported subprime is not necessarily from the commercial banking system, but from all kinds of investors in money market funds, private equity funds, pension funds, and all other financial products. The commercial banks and other mortgage originators originated the mortgages, sold it to investment banks, which then packaged it to various financial products, sold to investors I mentioned before. The amount left in the commercial banks was not big, otherwise, we should say banks such as JP Morgan/Wells Fargo/Bank of America to fall, other than Bear Stearn, Lehman Brothers, Merrill Lynch, etc, instead, we only see small commercial banks took a hit as they did not sell their mortgages to investment banks but retained them. The other huge loss are taken by pension funds, money market funds and other financial product investors.
Lucky for China, they have a precedence fresh in their minds about controlling shadow banking system. The shadow banking system in China is controllable. But the rich could get a haircut.