Societe Generale: China'S Economy Is Out Of Control &Nbsp, The Biggest Bubble.

Albert Edwards and Dylan Grays, a global strategy analyst at Societe Generale, pointed out in an exclusive interview with the Berne daily in Switzerland that China did not finance from the West.

In an interview, Edwards pointed out: "China is the biggest bubble.

Grays also made it clear: "China has hardly learned lessons from the Western misfortune, and sloppy monetary policy has just stimulated speculation.

The nominal growth rate of the Chinese economy is almost 20% per year, and the interest rate should correspondingly reach 20%. However, the real interest rate is negative.

Because of the control of capital circulation, Chinese can not pfer funds to foreign countries or banks, because inflation is obviously higher than interest on deposits.

What alternatives do they have?

Only buy and sell real estate.

Through the negative real interest rate induced construction boom, we have seen it in Spain, Ireland and the United States.

Now that the Chinese are doing the same thing and pursuing profit margins, it sounds familiar. They believe that no miracle will happen.

In the long run, I am totally optimistic about China, but I can see that the possibility of a hard landing and shock therapy for risky assets is taking shape.

In view of the cause of the bubble, Edwards said: "because of the fixed exchange rate policy and the rolling of capital, the reserve of money has risen dramatically.

In order to maintain the stability of the US dollar exchange rate, we must use the RMB to buy US dollars and print a lot of money for this purpose. This is China's quantitative easing.

The flood of funds can not be prevented by ligation, and half of the increase in money supply is attributable to exchange rate policy.

Grays said: "the whole world feels that Beijing's monetary and stimulus policies are better than those of Western policymakers.

Market participants believe that the Chinese authorities can control the situation and it will be easier to achieve their goals because they are not constrained by democratic procedures.

The idea that Beijing will make people get what they want is a disappointing space.

Some recent measures are simply joking: it is ridiculous to have a nominal economy of 20% per year, allowing only 6% of nominal interest rates.

Recently, if a company wants to raise the price of its products, it will face punishment, which is the lowest means of economic policy.

Besides, the Chinese authorities show some signs of panic, which is not good for the prosperity of capitalism.

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Edwards added: "the situation in China is very serious. Once the tiger is out of the cage, it will be difficult to catch it again.

Inflation is like a runaway horse, and Beijing tries to manipulate the figures by reducing the weight of food in the consumer price index (CPI).

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"If China does not get rid of its ties with the US dollar, it will force a revaluation of the exchange rate," he said.

This is a big issue for Chinese policymakers.

They are more restrained in their abilities and possibilities than the once unstinting Federal Reserve Committee.

In 2006, the US currency issuing bank still denied the possibility of collapse, and even said that bubbles did not exist.

Today is not the currency issuing bank, but the market shows too much confidence.

Now every stock is related to China: in order to let investors see at first sight.

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Two economists believe that "the greatest danger of the world economy" is not in the euro area, while in China, "China is brewing a new US 2007".