How China's efforts to restructure its economy are causing global panic
Andrew Sheng says China's efforts to rebalance its own economy are hitting the fragmented world hard
I was in Jakarta this week for an IMF-Bank Indonesia conference on "The Future of Asian Finance". This is also the title of a book launched last week, in which experts at the International Monetary Fund provided useful analyses to help Asian policymakers navigate the current turbulence.
This weekend, the G20 finance ministers and central bank governors are meeting in Ankara, with the aims of strengthening global recovery, enhancing resilience and buttressing sustainability. Unfortunately, we seem to be heading in the opposite direction.
The IMF memo for the G20 meeting noted the slowdown in global growth for the first half of this year, and said financial conditions for emerging market economies have tightened and risks are tilting towards the downside.
Understandably, it is calling for strong policy action to raise growth and mitigate risks. The problem is that the G20 members are likely to pull in different directions.
On September 15, we will mark the seventh anniversary of the failure of Lehman Brothers, a landmark event that triggered efforts to prevent a global collapse, which consequently set us up for the greatest financial bubble in recorded history. In the first half of this year, almost every country witnessed record peaks in their stock markets, bond markets and real estate prices. Given the fact that most countries are still slowing or having modest recoveries, the bubble has been pumped up by the activist monetary policy adopted by advanced economies known as "quantitative easing".
We have moved from a unipolar world to a multipolar casino where no one is fully in charge
Indeed, the McKinsey Global Institute has warned that global credit and leverage is at its highest ever, and despite much soul-searching about the need for macro prudential regulation to prevent bubble risks, there has not been much deleveraging. We have the odd situation whereby the governor of the Bank of England, currently chairman of the Financial Stability Board, warns about real estate bubbles, but hasn't dared so far to raise interest rates in his own country.