Dubai offers lessons to China

China needs to learn lessons from the Dubai debt crisis to avoid a similar catastrophic economic consequence despite the different economic weights of two countries. Although the Abu Dhabi government - the largest of the seven emirates including Dubai which comprise the United Arab Emirates (UAE) - has agreed to fund Dubai $10 billion, it is too early to say the crisis has been overcome.

After the Dubai government announced late last month that Dubai World, its flagship conglomerate, was unable to repay a $3.5 billion debt on time, the global capital market was rocked and share prices around the world dropped sharply. As a result, some international rating agencies lowered their credit ratings of other state-run UAE companies and international investors rushed to sell UAE bonds. Because of its huge impact on global markets, some financial experts have even warned of a second round of the global financial crisis.

Dubai World, which is mainly engaged in real estate and ports business, was ranked first among the emirate's state-run investment corporations. With the gradual recovery of world trade, Dubai World's port business has performed well, but its real-estate subsidiary, Nakheel, has been affected badly because of poor market conditions - and directly triggered the latest debt crisis.