Citigroup economists led by former Bank of England policy maker Willem Buiter said in a report that it may take as long as two years for the asset bubble to form and at least three years for it to burst.
Citigroup joins hedge fund manager Jim Chanos, Gloom, Boom & Doom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China.
The country has yet to raise interest rates or allow its exchange rate to appreciate, keeping in place some of the extraordinary measures implemented during the financial crisis even as inflation and asset prices accelerate.
BusinessWeek reported Buiter and Shen said, “What is policy in China doing about the threat of overheating in the financial and real economy? The short answer is: not much, and not enough to prevent the creation of what could become a major asset boom, bubble and bust.”