GDP vs. Bubble

Many nations that had initiated large sum stimulus plans in 2009 see themselves in 2010 facing various exit problem, including when and how much. A common point of view is that smaller economical entities will increase interest rates before larger ones, if they ever have had any stimulus plans. The U.S. may be last one that withdraw its huge stimulus plan. For example, Australia had hiked their interest rates as well as Vietnam. Other indirect ways of adjusting rates could include exchange rates, e.g., HK Dollar. But murky view of global economy doesn't come to consensus on the exit strategies within nations and among nations.

This situation is further complicated by different nations own economy growth goal. For example, China has, may be the only one, had GDP growth goal of 8% in 2009. There is not secret of achieving this goal when seeing housing bubbles arose. Recently, Premier Wen stressed that China won't retreat stimulus plan before he sees solid recovery. On the other hand, the red-hot housing market forces houses become unaffordable for millions of people even overall increasing wealth. Even Wen admitted that inflation is looming.

Housing is a big part in China's GDP, about 30%. The argument is that as achieving GDP goal is hailed, is it a good indicator? While the GDP causes instability such as housing and health care system, the price of paying this growth may be too costly and unwelcome. Nonetheless, the train has to be pulled forward by either this one or the other, but certainly not housing again (it played a key role in GDP before). In conceivable future, we will certain see China will expand their financial product lines and new energy lines to diversify GDP engine.

Another immediate problem is whether the growth is sustainable or not. As China's economy sizing up, the problem becomes more complicated beyond an economical issue. For example, the Weather Summit brought China into a hot spot to address non-economical topic. Such cases will have conflicts and impacts to China and other nations. In the Weather Summit case, China had ferociously protected their rights to keep growth engine running.

In conclusion, recovery in 2010 is highly probably for many nations. However, keep profile low and cautious in the New Year.