Cheap money and easy lending has caused housing prices to explode in the US. What will happen in China as the world rushes to invest there at any price?

The Chinese government is making some efforts to avoid finding out.

These articles and three others that were too old to include further illustrate the flow of massive amounts of capital that is shaping the global economy today. From VC money into China, real estate investment in South Africa and foreign investment in India, the money game today is global.

China Fights Excessive Lending That Fuels Overcapacity, But Is It Enough?

By HENNY SENDER

May 1, 2006

CHANGSHA, China -- China's move last week to raise interest rates is Beijing's latest effort to discourage the excessive lending and overinvestment that have allowed unprofitable companies to expand and churn out surplus production that gets dumped on overseas markets.

It is a battle that has been fought for years. Most economists in China agree the economic structure needs a dose of capitalist discipline so weak companies aren't allowed to bring down their stronger rivals. Still, the interest-rate increase, which boosted China's benchmark one-year lending rate to 5.85% from 5.58%, is probably too small to make a difference.

The increase is not a solution to "the danger of Chinese overcapacity or a solution to China's inefficient, perverse capital allocation," said Michael Kurtz, a Hong Kong economist for Bear Stearns & Co., in a comment on the central bank's move.

China Raises Interest Rates To Rein In Galloping Growth

With Small but Symbolic Step, Beijing Signals Movement Toward Market Economy

Is a Currency Change Coming?

By ANDREW BROWNE and MICHAEL M. PHILLIPS

April 28, 2006

Moving to head off an overheated economy, China's central bank increased banks' lending rates. Though small, the increase -- the first since late 2004 -- was a significant move toward relying on market mechanisms instead of administrative fiat to steer China's huge economy.

The increase was the latest in a series of measures indicating a new sophistication as China adjusts to its status as the world's fourth-largest economy. The central bank last July allowed a 2.1% rise in the value of China's currency against the dollar. While that didn't satisfy critics who accused China of keeping the currency artificially cheap to spur exports, it did show movement, and China has been edging gradually since then toward more flexible exchange rates. In addition, earlier this month, authorities announced they would permit ordinary Chinese individuals and companies to invest for the first time in overseas stocks and bonds.