Bank of Finland highlights threat of dual imbalance in China

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A Bank of Finland paper published on Monday says China's persistent external imbalances pose a serious threat to investment and may generate liquidity and asset bubbles.

John Knight and Wei Wang, the paper's authors, examine how imbalances in China have developed since 2004 and whether they can be sustained. Knight and Wei highlight two forms of extreme macroeconomic imbalance: an expenditure imbalance, whereby very high investment and very low consumption gives rise to rapid capital

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