Nicholas R. Lardy

So far China has avoided Southeast Asia's financial crisis, but it shares many of the underlying weaknesses that brought on the panic. Although it lacks capital convertibility and the high foreign borrowing that imperiled other countries, its weak banking system has issued a mountain of bad loans. Shenzhen has enough empty office space, for instance, to satisfy the market for three years. New reforms are supposed to reduce political nepotism in lending and apply the ax to subpar bank presidents, but whether they will succeed remains to be seen.