China Too Big To Fail? Not!!!

[Me.]

Is China headed toward collapse?

“The conventional wisdom in Washington and in most of the rest of the world is that the roaring Chinese economy is going to pull the global economy out of recession and back into growth. It’s China’s turn, the theory goes, as American consumers — who propelled the last global boom with their borrowing and spending ways — have begun to tighten their belts and increase savings rates.” Cont…

“That’s one vision of the future.

But there’s a growing group of market professionals who see a different picture altogether. These self-styled China bears take the less popular view: that the much-vaunted Chinese economic miracle is nothing but a paper dragon. In fact, they argue that the Chinese have dangerously overheated their economy, building malls, luxury stores and infrastructure for which there is almost no demand, and that the entire system is teetering toward collapse.

A Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt and provoking unknown political changes inside the Chinese regime.

The China bears could be dismissed as a bunch of cranks and grumps except for one member of the group: hedge fund investor Jim Chanos.”…Cont…

http://www.politico.com/news/stories/1109/29330.html

[Subdivisions]

1. A big, fat BULLSHIT. All of it. Also, China's production grew

at a rate of 16.5% in October and is still growing:

Nov. 12 (Bloomberg) -- China’s industrial production and trade surplus climbed in October, indicating a strengthening recovery in the world’s third-largest economy that’s likely to increase pressure on policy makers to let the yuan appreciate.

The figures came days before leaders from the Asia-Pacific region gather in Singapore, and a visit by U.S. President Barack Obama to Beijing, where he plans to raise China’s currency policy. Premier Wen Jiabao has so far rebuffed pressure to loosen reins on the yuan, awaiting a bigger rebound in exports in an effort to secure social stability and job gains.

“For China, it is necessary and appropriate to allow the currency to be more flexible,” Asian Development Bank President Haruhiko Kuroda said in an interview with Bloomberg Television in Singapore yesterday. “Crisis response by the Chinese authorities has been excellent,” and “they’ve brought about a very strong economic recovery,” he also said.

Production rose 16.1 percent from a year before, the most since March 2008, the statistics bureau said in Beijing yesterday. Retail sales gained an annual 16.2 percent in October, it said. The trade surplus almost doubled from September, to $24 billion, as the slide in exports eased to the slowest pace this year.

...snip...

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahj1Sl2ZEu8k&pos=3

More...

http://news.google.com/news?q=china%20economic%20growth&rls=com.microsoft:en-us:IE-SearchBox&oe=UTF-8&sourceid=ie7&rlz=1I7GGLR_en&um=1&ie=UTF-8&sa=N&hl=en&tab=wn


And, there's no demand in China for a higher standard of living? That's just pure, unadulterated BS.

[Me.]

5. Could Be, Total BS That Is

However, having dealt with that country for nearly a decade my observation is that all is not as rosy as the numbers seem. What will be interesting to me is, if these predictions come to fruition I wonder how it will affect Wal-Mart.

[Dreamer Tatum]

6. So you think an economy built around supplying $3.99 crap to WalMart

pays its workforce enough to benefit from the growth?

Keep on thinking that.

[pampango]

7. China's exports are continuing to fall, but their economy grows now on domestic demand.

"The latest economic data from China suggests that industrial production grew year on year at a level faster than expected. The government's huge economic stimulus package is likely to have helped a lot."

"The data indicates that activity in factories and workshops increased by 16.1% in October compared to a year ago. Importantly, they see evidence in this latest data, that Chinese consumers are starting to make more of a contribution to economic growth here."

"China needs consumers to spend more to spur domestic demand for the goods its factories produce, as it is unlikely to be able to rely on US consumers in the years ahead in the same way that it could before the financial crisis."

"China has been trying to boost domestic demand for the goods its factories make, as exports have been declining for 12 months now."

http://news.bbc.co.uk/2/hi/business/8353909.stm

----------------------------------------------------------------------

As China's exports continue to fall and the economy still grows, more of their production is being consumed domestically rather than exported. Many here have wanted China to base its economic growth more on internal demand rather than on exports and that seems to be happening.

If Europe and North America rebound economically, all governments will have to act to prevent the huge trade imbalances that existed before. (Of course, if they don't rebound, China's exports will continue to decline and their growth will have to be domestically-based if it is to continue.) As Chinese consumers get used to the benefits of an economy that is more focused on their needs/wants, perhaps they will be less willing to accept a return to an export-only policy that leaves little for their own consumers.

[onehandle]

2. LOL! Total crapola. China will run the world in a few decades. There's no stopping them. nt

[Dreamer Tatum]

8. Maybe you should read the article.

It amazes me how people who mistrust every utterance from their own government will accept as gospel what comes from another government.

We're supposed to be agog over automobile sales in China, yet as the article states, gasoline production there is flat. If China wants to be an actual economy rather than the world's supplier of rubber dog shit, at some point it will have to grow a credible middle class that wants and can afford the crap they have in the megacities.

I'm not sure why people are so enamored of China's economy, when in fact it's a lot like what's going on here: lots of rich people, tons of poor people, and not much chance to move up.

[onehandle]

10. They don't need a credible middle class. They are a nation of slave labor.

And we love the low Wal-Mart prices and beg for more.

Time to start brushing up on the leading Chinese language.

I would start with, "Please hire me."

[Dreamer Tatum]

11. In the 80's we were supposed to learn Japanese

Look how that turned out. Sorry, a country without a robust domestic aggregate demand will exist in a deflationary state forever unless the government relies on infinite demand for exports and artificially weak home currency.

If you merged China and the US and evened out the distribution of income, you'd have a hell of an economy.

[TheKentuckian]

3. Unless they are very careful they will start the outsource portion of the cycle

before they hit the capitalist peak. Each time a new host is taken over the cycle gets quicker.

[Sinti]

9. Goodness, you make it sound like some kind of parasite is feeding on them :p n/t

[Statistical]

4. Unlikely. 12%-16% isn't sustainable so the Dragon will be forced to accept a much lower...

GDP growth of "only" 7%-8% over next decade or so.

Then again got about 20% of my investments in China so maybe I am just a sucker.