Morgan Stanley’s Roach Sees ‘False Alarm’ on China (Update1)

March 9 (Bloomberg) -- Morgan Stanley Asia Ltd. Chairman Stephen Roach said he sees a “false alarm” in warnings that asset bubbles or a banking crisis could threaten China.

“Tales of asset bubbles -- property and credit -- and/or an imminent banking crisis are making the rounds. These fears are overblown,” Roach said today in an e-mailed note. “While China can hardly avoid bubbles, it is successful in preventing them from destabilizing the real economy.”

Premier Wen Jiabao vowed to crack down on property speculation and restrain inflation expectations in an annual speech to the National People’s Congress on March 5. The Chinese economy grew 10.7 percent in the fourth quarter, the fastest pace in two years, on stimulus spending and record lending.

Chinese policy makers recognize that stimulus must be tempered and “have been among the first to implement post- crisis exit strategies,” Roach said.

The nation’s central bank has raised reserve requirements for banks twice this year and set a target of less new lending than in 2009.

Roach’s report was entitled: “False alarm over Chinese bubbles.”

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net