OECD: China should slow credit growth to avoid bubbles

The Organization for Economic Cooperation and Development (OECD) said that China should rein in credit growth to minimize inflation and stem possible bubbles, Bloomberg reported. The OECD raised its predications for the growth of the Chinese economy to 8.3% from 7.7% in June. The US$1.3 trillion boost in credit has boosted the economy to its fastest growth in a year last quarter, pushed housing prices to their highest levels in more than a year, and driven the Shanghai Composite Index up 82%. According to a government report, housing prices in 70 cities rose 3.9% in October. If the development of property and commodity bubbles is left unchecked, China and other countries across Asia could face disasterous consequences similar to the explosion of the American mortgage bubble that prompted the global financial crisis. An abundance of bad loans and the yuan’s peg to the US dollar must both be reassessed in order to regulate growth, the OECD said.