By Andy Xie, guest economist to Caijing and board member of Rosetta Stone Advisors
(Caijing Magazine) At the beginning of 2009, I wrote that the global economy would stabilize in the second half, and a bear market rally could start in the second quarter of 2009. I thought that stagflation would be the dominant trend for the next few years. I am still sticking to my story. The bear market rally began earlier than I expected. The reason was that major governments have been introducing subsidies for speculation. They believe that the main problems are liquidity and confidence. Hence, if investors or speculators are brought back in the game, the world economy could return to a virtuous cycle again. I think that this type of approach could lead to a second dip in 2010.