Wang Tao, chief economist with UBS AG in China, told China Daily on Tuesday that extensions of local-government debt already started last year amid concerns that municipalities were hurting from a sharp decline in housing development and fixed asset investments from Beijing.

FORBES: One Way China Resolves State Budget Problems

UBS, argues that China is one of the most rapidly liberalising economies in the world, and is opening markets far more than India or Brazil.

ECONOMIST: The halo effect | The

Jonathan Anderson, a China specialist at UBS, calculates that under the current pension system the government could face unfunded liabilities of up to 6% of GDP annually a few decades hence.

ECONOMIST: Getting old before getting rich

Investors had not been expecting another European rate rise right away, thanks to troubles in the U.S. housing market and uncertainty about China, but UBS analyst Stephane Deo does see the ECB hiking rates again to 4.25% in September, and to 4.75% in mid-2008.

FORBES: ECB Indicates A Pause

In separate news, a China state bank has suspended FX swaps with UBS, Societe Generale, Credit Agricole, and BNP Paribas after those banks had reportedly reached their credit limits with the BoC.

FORBES: Stocks Perk Up On 'Operation Twist' Talk, Take Italy In Stride