Experts report world economy in good health.

The following article is pretty optimistic as You may understand from the title. But is it all that positive as it's described by the author Sarah H. Wright. There was no attention payed to the extremely conflict situation in the arabic world, central asia. The experts just tried to avoid this issue. From my opinion and I think not only from mine, oil prices in these days depend directly on what is going on in arabic world, I mean for USA mostly, as Europe is mostly dependent on Russian oil and natural gas. Thus, You can read the following article, analyze, make some conclusions, may agree or not. I think aspects described are very argumentative.
"Two MIT economists agreed on the generally vigorous health of the global economy in an IAP presentation held Tuesday, Jan. 24, in E51-325.

The presentation, "The State of the World's Economy," drew a standing-room-only crowd to hear Robert Solow, 1987 Nobel laureate in economics, and Olivier Blanchard, professor and former department head of economics, report on the vital signs.

Blanchard described these as "good economic times," noting the high growth rate, high productivity and relatively low unemployment in the United States. Europe, he said, is "emerging from a long slump," though it still faces low productivity and high unemployment; Japan is also emerging from its 15-year slump. China and India are growing robustly.

Reasons to worry, said Blanchard, include global imbalances due to the United States' "enormous deficit versus the surpluses in Japan, China and the Middle East" and the consequences if other countries cease to find investing in the United States as attractive as they do now. This is especially important since the foreign investment in the United States, previously made by individuals, is now largely made by central banks and governments.

Blanchard also marked a "nonevent -- the macroeconomic effect of the price of oil" -- as significant to current economic health. He contrasted the "nonevent" of the past few years to the oil crisis, inflation and economic ills of the 1970s.

"This time, the change in oil prices was a nonevent, thanks to better monetary policies and weaker bargaining power by workers. Last time, workers tried to keep their purchasing power through higher wages, despite higher oil prices. This time, workers appear to have had no alternative than to accept lower wages," he said.

Solow diagnosed with more caution, predicting U.S. growth would be "OK, but not splendid" and Europe's growth would be slow, due to bad policies and an imperfect adaptation to technology. He also noted that U.S. workers' wages are "paying for increases in oil prices."

"The failure of the U.S. to invest more in renewable energy resources is a piece of stupidity. The risks of a sharp rise in oil prices are very great," he said.

Solow characterized the NASDAQ boom of the 1990s as a "fit of madness" that yielded the 2001 recession but is now passing, based on the rise in real equipment spending over the past three years.

Solow said he anticipates that central banks will continue to find investment prospects in the United States attractive, but warned against generalizing.

"The best economists can do is try to predict the consequences of small events," he said."

Economic Survey of China 2005: Reforming the financial system to support the market economy

Continuing the topic of the China's rapid economical development in the latest years, You can analyze this informtion and understand that one of the key moments of the China's economical success is correct re-organisation of the financial system. A significant reform of the banking sector is underway,
One concern of the authorities in moving to a more flexible exchange rate, perhaps overstated given the low exposure of banks to foreign lending, has been the weakness of the banking system, but significant reforms have now been undertaken in this area. Until 1995, banks paid considerable attention to national policies in determining the allocation of bank credit. As a result, banks accumulated around CNY 4 trillion of bad debts mostly as the result of loans made in the period up to 1999. Wide ranging reforms have been introduced since then. Banks have started to modernise their lending and risk management practices. Better risk weightings have been introduced by the banking regulator and the classification system for non-performing loans has been made more realistic. Foreign investors have been allowed to acquire stakes in 12 second-tier joint stock banks. Overall, these reforms appear to have been successful, as since 2000 the new loans made by banks seem to be of a much better quality. With a reform of the banking sector infrastructure in place, the government has embarked on a strategy of recapitalising the major banks and preparing to list them on the stock market. The process of establishing a sound banking system is now well advanced for two of the major banks and has started with a third.
but further changes are still required in this sector.
Re-organisation of the remainder of the banking system is still needed and would be best accompanied by a growing marketisation of the banking sector. Almost 30% of the banking sector remains to be recapitalised. The process may take some time in the rural credit co-operative sector where there are a large number of small institutions with significant problems. Progress has been made in a number of pilot provinces where co-operatives have been converted into commercial banks. The companies set up to dispose of non-performing loans previously owned by the banks are recovering about 20% of their face value and so eventually there will be a need for the government to provide for their refinancing. Taking this into account, the ultimate costs to the government budget of recapitalising the banks, though likely to be substantial, appear manageable. But recapitalisation only represents the first step in improving the banking system. Better governance is also needed. Amongst both the joint-stock banks and city commercial banks one possible route might be to involve the non-state sector to a greater extent than at the present, as there are only a couple of banks controlled by private interests, while limiting the participation of industrial and commercial groups. As to the major banks, policy should focus on improving governance; in particular by introducing a transparent recruitment process for appointments to senior management posts. Given that a move to private ownership and changes in management are likely to take time, the bank regulator will have a key role to play in ensuring that banks put adequate risk management tools into place.
Capital markets need to be developed.
Broadening financial markets is a further crucial aspect of improving the allocation of capital. At present, such markets have a limited role and this generates a concentration of financial risk in the banking sector to a greater extent than in OECD economies. The equity market could be further developed, as the market value of freely tradable shares represented just 9% of GDP in 2004. Moreover, nearly all the quoted companies are state-controlled, while outstanding corporate bonds were equivalent to less than 1% of GDP in 2003. Share markets are unable to act as a market for control as the bulk of issued shares have restrictive covenants that, in theory, limit their transfer. The government is moving in the direction of liberalising the market, by easing restrictions on the sale of state-owned shares in quoted companies. At the same time, the pricing of initial public offers has been put on a more market driven basis, but the final decisions on which companies are listed are still made by the State Council. A freer procedure could be considered subject only to ensuring that issuing criteria have been met and that information disclosure has been adequate. In the corporate bond market, decisions on new issues are still determined administratively and are subject to industrial policy criteria. Here too a more neutral procedure could be considered. Such reforms would allow the developing private sector greater access to capital markets and make the markets more efficient, so helping to avoid the significant waste of savings represented by non-performing bank loans. Moreover, improved financial returns would benefit those saving for retirement.