Boj Official Sees China

"China has not yet peaked with respect to working-age population ratio, but it is close," while loans are on the rise and property prices showed a clear upsurge through 2010, Nishimura told a conference in Sydney hosted by the Reserve Bank of Australia and the Bank for International Settlements.
"It is clear that not every bubble-bust episode leads to a financial crisis. However, if a demographic change, a property price bubble, and a steep increase in loans coincide, then a financial crisis seems more likely. And China is now entering the 'danger zone'," he said, according to the text of his speech posted on the BOJ's website.

TOKYO (Reuters) - The combination of a property price bubble, demographic changes and rapid loan growth heightens the chance a country will face a financial crisis, a Bank of Japan deputy governor said on Tuesday, warning that China is now entering a "danger zone" in this regard.

Kiyohiko Nishimura, one of the BOJ's two deputy governors and a former university professor with expertise on data analysis, noted that there were similarities between Japan's asset-price bubble of the 1990s and the U.S. housing market bubble of the 2000s.

In both cases, when the ratio of working-age people to the population peaked at a time of high property prices and sharply rising loans, these coinciding conditions led to "malign" bubbles that spawned a financial crisis, he said.

"China has not yet peaked with respect to working-age population ratio, but it is close," while loans are on the rise and property prices showed a clear upsurge through 2010, Nishimura told a conference in Sydney hosted by the Reserve Bank of Australia and the Bank for International Settlements.

"It is clear that not every bubble-bust episode leads to a financial crisis. However, if a demographic change, a property price bubble, and a steep increase in loans coincide, then a financial crisis seems more likely. And China is now entering the 'danger zone'," he said, according to the text of his speech posted on the BOJ's website.

Nishimura made t...