Warning of a credit bubble in his latest China report, Morgan Stanley economist Andy Xie questioned the central government's ability to fine-tune the economy, noting that mainland bank loans had increased 52% since January 2002. Xie said China is over-invested by more than US$200 billion adding China's financial system doesn't price risk properly so any credit surge would likely produce a bubble. All the hallmarks of a bubble were evident, he said, citing excessive optimism about the future, ample capital inflows and lack of risk control.
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