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  • Print publication year: 2014
  • Online publication date: April 2014

1 - Re-balancing in the Face of the Global Financial Crisis (1): November 2008

from Part I - China and the Global Financial Crisis


Pile the sandbags to save the dyke and prevent it bursting:

Zhu lei sha dai, 筑垒沙袋

Jia gu di ba, 加固堤坝

Fang zhi jue kou, 防止决口

1. The Global Macro Economy

Act I. The new age of boundless growth

During the era of capitalist globalization since the 1970s, there has been a long, slowly developing global asset bubble, which gathered pace in the new millennium. The mechanism is exactly the one predicted by Keynes, Kindelberger, Minsky and Galbraith. They each warned that deregulated financial markets have an in-built tendency to create asset bubbles. A vicious circle develops naturally in which credit expansion based on increasing asset values stimulates further increases in asset values. The intensity of such asset bubbles is increased by the wide sense that a ‘new age’ has arrived in which the prospects for growth and profits are boundless due to new technologies and markets. The era of capitalist globalization has nurtured such sentiments on an unprecedented scale.

The central mechanism of the financial crisis is the money-creation machine unleashed by financial market deregulation, led by Wall Street. Since the 1970s, under the leadership of the Washington Consensus institutions, driven by the interests of Wall Street banks, the United States promoted bank privatization and deregulation across the world. The period witnessed a growing ‘financialization’ of the economy, as credit expanded in all its various forms.

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Re-Balancing China
  • Online ISBN: 9781783081622
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