Chinese growth tops 10% as Obama announces limits on US banks (+ analysis); Untreated wounds and disease now greatest risk in Haiti; Karzai offers land and pensions to retiring Taliban; China on Google complaints; and more
Top of the Agenda: Global Economic Questions
China grew 10.7 percent in the fourth quarter this year amid rising inflation, which could prompt Beijing to adopt stronger policies to prevent economic overheating but also slow the global recovery. The Chinese economy expanded (FT) 8.7 percent last year, well above its 8 percent target. In response, the government stepped up measures to slow bank lending. The lending boom increased concerns about asset bubbles, especially in real estate, where prices rose 7.8 percent on average last year alone. The World Bank warned (FT) that although the global economy will grow 2.7 percent this year, the effects of the crisis will linger for years to come.
Hans Timmer, head of the bank's forecasting group, said growth in developed and developing countries will be insufficient to absorb newcomers into the labor markets or provide enough jobs for the unemployed."
In the United States, the Obama administration announced (NYT) plans to limit bank sizes and excessive risk-taking for the country's largest financial institutions. The restrictions, which follow the approach of former Federal Reserve chairman Paul Volcker, would be similar to those passed in the Glass-Steagall Act in 1933 during the Great Depression, which was revoked in 1999. US banks warn (WashPost) that continued slow lending indicates that the economy remains weak.
In Dow Jones' Financial News, CFR's Benn Steil argues that the monetary forces behind the crashes of 1929 and 2008 were very similar. In the 1920s, as in the mid-2000s, Fed officials mistakenly thought that they had found, in the practice of trying to stabilize a price index, the holy grail of monetary policy. In consequence, central bankers are once again grasping for a new orthodoxy.
This CFR Special Report outlines lessons about the dangers of policies that fuel the rapid buildup of debt across the economy, including excessive leverage and lax regulation.
ASIA PACIFIC: China Google Case
Chinese Vice Foreign Minister He Yafei said Google's complaints about cyberattacks and censorship in China should not be linked (WSJ) to US relations with the country.