China anyone?

Nouriel Roubini's March 23 blog gives a good start/recap to the China story.

Interesting - the precise recipe which bought China to its economic growht is causing severe imbalance. My view is that while if China does not do anything, this train will eventually run out of track to move on and crash. However, any change of exchange rate or capital flow mechanism may risk derailing this train rather than just slowing it down. The bad loans problem can only be multiplied by mortgage defaults from housing bubble. While the gravy train is running, money will keep pouring in. If one opens the capital gate (allow free flow of money to determine FX) , FDI can drain just as fast as it came in.

I understand and agree with Nouriel's view of surprised revaluation this year. That is if the global economy does not take a U-turn for the worse. Since China's growth is so dependent on FDI and external growth. A global economy slowdown might buy China more time to preapre the eventual revaluation by adjusting their capital controls.