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www.chinaview.cn 2009-03-22 19:36:48 Print

Special Report: Global Financial Crisis

TOKYO, March 22 (Xinhua) -- The business deterioration of financial institutions and major corporations will pose new risks for the world economy and trigger a "second shockwave" of the financial crisis, said Takeshi Sekiyama, an expert with a Tokyo-based think tank.

"Bad loans of financial institutions and the bankruptcy of leading companies are likely to trigger a new round of crisis, so related governments should pay close attention (to those problems)," Sekiyama, research fellow of The Tokyo Foundation recently said in an exclusive interview with Xinhua.

He said major financial institutions in the United States including AIG and Citigroup avoided going bankruptcy in the financial crisis thanks to government bailout. However, this can only cap the problems and will not eradicate the real crisis.

"If the economic slump keeps expanding and bad equity keeps ballooning, there will be one day the risks will erupt again," he said. "The market already made such predictions, that's why the share price of AIG is just one percent of the price it was one year ago."

Sekiyama said the same hazards were also lying in big manufacturers such as General Motors and Fords. "If they cannot improve their earnings, it will be very difficult for the government to support them in a long time range."

"Like their U.S. Counterparts, Japanese and European manufacturers and financial institutions are also exposed to the same risks. If any of the major market players went bankruptcy, the world financial system will be dragged into further chaos and a chain of corporate collapse is expected," he warned, adding that this would be the so-called "the second shock wave of the financial crisis".

Sekiyama said it is hard to predict the likelihood of the occurrence of the "second shockwave", but any collapse of big companies could be the prim cord.

He also mentioned that China's economic growth has shrank to 6.8 percent in the last quarter of 2008, but it has the potential to grow at a pace of 8 to 10 percent under the massive stimulus package of 4-trillion-yuan.

However, he noted the key to reach such growth rate is not how much the central government of China can provide, but how much enterprises and local economies can loan from banks. "The February outstanding RMB loan rose 24.17 percent, and China plans to sell 200 billion yuan (29 billion dollars) of bonds on behalf of local governments to spur economic growth, these marked a good start to bring the economy back on growth track."

The Tokyo Foundation, established in 1997, is an independent organization engaging in policy research and making economic proposals.




Editor: Deng Shasha