China 2009: The Confidence Deficit

Business Week ^ | 12.31.08 | Dexter Roberts

[Dr. Marten]

[...]Reversing the decline will depend on confidence. Even as the world economy will likely continue to struggle in the New Year, China is counting on consumers to lift still-strong retail sales. Confidence, however, is just as rare a commodity in China as in the rest of the world.

China's city dwellers aren't looking back at 2008 with fondness. Chinese stock markets fell some 65%, ripping a hole in many a nest egg. Real estate prices have slid by as much as 10% in Shenzhen and other cities, and are flat at best in Beijing and Shanghai, says China's National Bureau of Statistics. Throw in continuing worries about rising health-care and education costs and it's no surprise that the national data collecting organization recorded a 4%-plus drop in consumer confidence in October, as compared to the same month a year earlier. As recently as July, consumer confidence was growing, but those days now seem long ago.

[misterrob]

China is screwed. Their junkie customer (US) is unable to keep buying their exported goods, the Euro market is worse off and their domestic unrest is only going to increase as more and more companies fail.

People make a big deal out of government interference in the market but when economic systems crash the risk of outright government failures rises and all sorts of bad things happen.

[Zhang Fei]

“We have nothing to fear but fear itself” is merely cover for the failure of Roosevelt’s socialist price floor schemes which benefited the well-connected at the expense of the common man. The real problem had to do with the destruction of decades worth of savings via excessive investments piled up high - tulips, industrial companies, internet companies, real estate - you name it, we’ve invested in them. The economic busts we’ve had are the market equivalent of ill-conceived communist investments - the key difference being that capitalism’s economic busts don’t involve tens of millions of dead. The solution to this bust is to let consumers and investors (i.e the market) do what they do very well - allocate their funds in a more efficient manner, not out of altruistic reasons, but because they don’t want to waste or lose their hard-earned money.