China warns ‘side effects’ of US economic stimulus risk causing sharp market correction
- Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, says Chinese officials are ‘very worried’ that foreign asset bubbles will burst
- Guo says high valuation of US stock market, the world’s largest, means it is the most at risk of a ‘serious run in the opposite direction’
The “side effects” of aggressive economic stimulus policies in the United States and other developed countries have started to surface in the US stock market, China’s top financial regulator warned on Tuesday, saying officials in Beijing were “very worried” that foreign asset bubbles could burst soon.
Guo Shuqing, Communist Party secretary of the People’s Bank of China (PBOC), identified the US market – the world’s largest – as the greatest bubble risk in the global economy when asked on Tuesday.
His comments are the latest in a string of warnings made by policymakers in Beijing about mounting external financial threats and their potential impact on the Chinese economy.
If [the financial market] diverges too much from the real economy, there will be problems
Guo, who is also chairman of the China Banking and Insurance Regulatory Commission, said the extra liquidity in US and European financial markets from stimulus measures had pushed asset valuations above levels justified by economic fundamentals, risking a “serious run in the opposite direction”.