No Credit Crunch in Asia
March 17, 2008 | BY
clpstaffDespite the global credit crunch and the PRC's overheated economy, investor uncertainty will not extend to Asia, according to Merrill Lynch's analysis report.
Despite the global credit crunch and the PRC's overheated economy, investor uncertainty will not extend to Asia, according to Merrill Lynch's analysis report.
“Global credit markets are in trouble, but there are few signs of a credit crunch in Asia, in our view,” said TJ Bond, economist at Merrill Lynch. It is true that the credit crisis has now spread to many regions outside of the US, but only 4% of outstanding credit is accounted for in Asia, he said.
“Compared to the US, we think Asia stands at very different points in its investment, credit, and housing cycles,” Bond said. “The market for domestic credit is not globalized, and not subject to contagion as the US credit cycle turns down.”
The report described that despite the way many markets have or may become victims of the credit crisis, the market for local bank credit is not. Since the macro tightening of 2004, credit in the PRC has not been keeping pace with the gross domestic product [GDP]. Both volume and price, according to the report, are responsive to trends in domestic monetary policy.
The report also noted that China's Premier Wen Jiabao, in the opening ceremony of the 11th National People's Congress, only mentioned the word “overheating” once, showing the government's prudence in presenting the current economic situation in the PRC to the public.
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