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The Bubble Economy. "The sharpest analysis I heard was from Li Ruogu, the deputy governor of China's central bank. He even used the "B" word: "If credit is growing as fast as it has been, we will be concerned about a bubble," he said, adding that the central bank had raised reserve requirements for Chinese banks this month partly "to send out the message that we are concerned about overheating of the economy." Li warned that the central bank could also raise interest rates soon, a move many analysts think is overdue. Li said inflation during the first quarter was running at an annualized rate of over 12 percent. "If that trend continues, we will be in the position to raise interest rates," he warned .. Li also cautioned that the United States shouldn't assume that China will keep buying U.S. Treasury securities indefinitely. If the United States doesn't protect the value of the dollar so that it is a stable "anchor," China will eventually move to hold its reserves in a basket of currencies, he said .. ". More "Is China's Economy Overheating?". Posted by Greg Ransom | TrackBack