By Pieter Bottelier
The economic slowdown in China started in the second half of 2007: well before the effects of the subprime crisis in the United States began to be felt internationally. The initial downturn was orchestrated by the Chinese government, which aimed at cooling an overheating economy (GDP growth in 2007 was recently adjusted upward to 13 percent!) and at controlling a property market bubble that was considered potentially dangerous (Xinhua News Agency, January 15). The government was also concerned about the stock market bubble, although less inclined to intervene. Japan’s prolonged economic stagnation following the simultaneous bursting of property and stock market bubbles in 1990-1991 was clearly on the minds of Chinese policy makers when they intervened in the property market by tightening credit (especially for mortgage and construction loans) and making it harder to get land for construction.
