Chinese crisis in offing:To hit Nepal harder than the global crisis

Kathmandu, March 21:

China is heading towards the US-like situation that led to global crisis.

“China is also heading towards a US-like situation,” said Rashed Al Mahmud Titumir, professor of economics at Dhaka University speaking at an interaction here. “Currently, China is also following the US path that led to the global crisis,” he said adding that there has been a huge job cut in China over the recent months.

The impact of the crisis in China on Nepal, according to him, will be even more deadlier than the global crisis. Consumer items will become cheaper than food.

“TVs will be cheaper but food prices will skyrocket, hurting Nepal,” agreed Nabin Subedi, Team Leader, ActionAid Nepal. “It might lead to a humanitarian crisis.”

At a time when the government is fighting to meet the rising expectations of Nepalis, after the global crisis the Chinese crisis will be the last straw on its back.

Nepal, unlike earlier claims, will feel the heat of the global recession as it has a strong representation of its labour force in the markets that are tied to the US economy.

Though lesser global exposure will result in lesser impact on Nepal, experts here have claimed that remittance — the life line of Nepal’s economy — will decline when the number of migrant Nepali workers start returning and the outward bound trend slows down.

“Thriving financial institutions will see holes in their balance sheets,” they said.

The professor toed the school of thought that developing countries like Nepal will feel

the heat of the financial crisis — in his own words, ‘Real Systemic Crisis’.

Blind faith in the efficiency of deregulated financial markets and the absence of a cooperative financial and monetary system created an illusion of risk-free profits and licensed profligacy through speculative finance in many areas.

“The crisis — fuelled by easy money — has raised serious questions as to whether it is the result of misleading policy interventions and whether this will weather US hegemony,”

the professor said adding that the crisis was evident due to over-production and decline in profit. “The US tried hard to stop this crisis by offering more innovative products

but failed,” he added.

The mounting turmoil reflects failures of national and international financial deregulation, persistent global current-accounts imbalances, absence of a rule-based international monetary system, and deep inconsistencies among global trading, financial, and monetary policies.