Will world economy to "touch bottom for 2nd time"?

13:09, August 24, 2010      

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At present, everyone is concerned whether the world economy is to "touch bottom for the second time". To answer this question, I think first of all we should make clear what the "bottom" means.

If the start of global financial crisis with Lehman Brothers Holding Inc., a global financial service firm, declaring bankruptcy in September 2008 was taken as the "bottom", the world economic recovery could the be a process of gradual change.

The global financial crisis was a crisis triggered by a liquidity shortfall in the United States banking system caused by overvaluation of assets. On April 2007, mortgage lender New Century financial corporation filed for bankruptcy protection, and this led to the subprime crisis. Then, Ballston was purchased by Morgan Stanley; the U.S. Treasury Department took over Fannie Mae and Freddie Mac. Afterwards, Lethman Brothers Holdings Inc. filed for bankruptcy, the U.S. government made efforts to assist AIG, and Merril Lynch sold itself to the Bank of America (Merril has the nation's largest brokerage firm).

Nations around the world made concerted efforts for rescue operation and such rescue is nevertheless no panacea. Despite the fact that global economic situation was inclided to turn better, there occurred the Dubai crisis, in which Dubai's six-year building boom grounded to a halt, and financial crisis attacked Goldman Sachs Group, Inc.; there was a withdrawal of Fed support in the form of mortgage bond for Fannie Mae and Freddie Mac. and a deepening debt crisis swept Europe.

Some people say the world economy goes "W" shape for recovery, whereas China's economy is in a good "V" shape despite the impact of global financial crisis. Chinese economy was ensured to reach its goal of 8 percent growth (The National Bureau of Statistics reassessed the growth goal as 9-percent in 2010). This is the main current that has to be affirmed. It has been promoted chiefly by the government policy, and there are also risks of inflation, non-performing loans and other hidden hazards involved. Essentially, China's economic growth cannot deviate or sway from what guide the wave-like movement.

People say today that "the economy will touch the bottom for a second time," and it is in fact means that "whether Lehman Brothers'bankruptcy of 2008 would recur" due to the European debt crisis.

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(Editor:燕勐)

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