Chinese banks face a $350bn (£230bn) debt time bomb that could mirror the financial crisis suffered by US and European banks, according to banking experts.

Chinese facing debt time bomb – Telegraph

The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

New round of foreclosures threatens housing market – washingtonpost.com

The economy grew 5.9 percent in the fourth quarter of 2009, but the number is not as strong as it looks. Most of it is based on temporary factors, notably a spurt of inventory replenishment and the now-waning fiscal stimulus. An overhang of debt and low property values continues to weigh down banks’ and consumers’ balance sheets. Greece’s financial problems raise the possibility of a sovereign debt crisis in Europe, where growth has already slowed to a crawl and forecasts are dismal. Developing economies are a bright spot, but China, in the aftermath of a mighty stimulus program, is showing signs of a property bubble and is likely to throttle back.

National Journal Magazine – A Long Way From Economic Normalcy

The worst-case scenario, for both the government and business, would be an economic crash that reduced the rate of annual GDP growth to below 5%. This could lead to a rise in political instability (and possibly even regime change), as the legitimacy of the Chinese Communist Party rests on its ability to deliver rapid economic growth. Yet the risk of political instability is precisely why the Chinese government would take every possible step to prevent a crash. Moreover, the government’s pockets are still deep, so it remains able to prop up growth through public spending. However, it would not be able to sustain indefinitely the sort of policy support seen in 2009, as problems would begin to build up in various parts of the economy–notably in the banking sector. But in 2010-11 at least the government will continue to be able to support economic growth.

GARP : Global Association of Risk Professionals

If Greece defaults, “it risks exacerbating the economic downturns and could even reignite an acute financial crisis” through higher interest rates, Marc Chandler, global head of currency strategy at investment firm Brown Brothers Harriman, wrote in a report.

A Greek default would hit Americans hard in one major area: exports. According to the Economic Report of the President by the White House’s Council of Economic Advisers, in order to “fill the gaps left in demand” by the recession, “net exports need to rise.”

How Greece’s Debt Crisis Affects America – US News and World Report

“China’s dependence on export-led growth … is unsustainable over time,” Robert Zoellick, president of the World Bank, argues in a forthcoming article in the journal the International Economy. He cites a recent IMF analysis saying that for China to maintain its trend of 8% growth annually with the current pattern of trade, it would have to double its share of world exports by 2020. That isn’t going to happen.

Bubble Trouble May Lie Ahead For China Bulls – Investors.com

“The economy is still on life support,” says Harris, who took over as chief North American economist at Merrill Lynch last September from David Rosenberg. “It’s a long way to go before we start thinking things are OK.”

Too early to declare victory, top forecaster says Forecaster of the Month – MarketWatch

Poor economic data in the US coupled with Europe’s debt crisis are contributing to an increase of the risk of the US economy going through a double-dip recession, Nouriel Roubini, who predicted the 2007 financial crisis, wrote in a research paper.

At best, the US economy is headed for a U-shaped recovery this year, Roubini said. That has been his prediction in recent months.

The US faces challenges in the second half, especially as fiscal stimulus measures fade, and “appears far too close to the tipping point of a double-dip recession,” he said.

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