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China's Economy Goes From Boom To Bust
IBD Editorials ^ | November 8, 2011 | Editor

Posted on 11/08/2011 5:37:21 PM PST by Kaslin

Global Crisis: The news these days is filled with stories about the euro zone economies and their ongoing crisis. But another, potentially bigger and even more important crisis is brewing — this one in China.

Amid seemingly endless stories about the Chinese Miracle and how China's soaring economy is about to overtake the U.S. comes news that suggests the death of America as No. 1 may be exaggerated — and, in fact, may be dead wrong.

Indeed, China's economy may be on the cusp of a major growth reversal.

The cause: China's imploding real estate market. Since late summer, Chinese home prices have tumbled, partly a result of Chinese government policies intended to keep the economy from overheating.

Barclays Capital Research, the venerable British bank, predicts China's home prices will fall 10% to 30% next year, hitting the economy hard — and putting at risk the Chinese economy's 20-year string of 10% average GDP growth.

But that's only the beginning of the Big Cooldown.

Much of China's growth over the past three years has been fueled by a massive pile of debt. Chinese banks have lent an astounding $8 trillion since 2008 — an amount that dwarfs the Eurozone's $4 trillion in debt.

That debt binge is now abruptly ending as China begins to ratchet up interest rates and limit home-buying to keep prices in line. An epic bust is coming.

(Excerpt) Read more at news.investors.com ...


TOPICS: Business/Economy; Editorial; Foreign Affairs
KEYWORDS: feelgood; manufacturing; ntsa; propaganda

1 posted on 11/08/2011 5:37:23 PM PST by Kaslin
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To: Kaslin

Goodbye, Taiwan.


2 posted on 11/08/2011 5:43:21 PM PST by gaijin
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To: Kaslin
"Oh no! not my shi**y economy too?"


3 posted on 11/08/2011 5:44:29 PM PST by mylife (The Roar Of The Masses Could Be Farts)
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To: Kaslin

very dire.

a global slow down at least.


4 posted on 11/08/2011 5:46:22 PM PST by ken21
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To: Kaslin

I thought these guys invented the abacus?


5 posted on 11/08/2011 5:46:44 PM PST by mylife (The Roar Of The Masses Could Be Farts)
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To: TigersEye

Pei-Ping


6 posted on 11/08/2011 5:50:38 PM PST by Army Air Corps (Four fried chickens and a coke)
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To: gaijin

May I suggest “The Coming Collapse of China.” by Gordon R. Chang?


7 posted on 11/08/2011 5:56:30 PM PST by JayVee (Joseph)
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To: Kaslin

Just the end of another Dynasty - move along nothing to see here.


8 posted on 11/08/2011 5:56:44 PM PST by Mike Darancette (999er for Cain.)
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To: JayVee

I’ll read that FOR SURE!

I vaguely recall having read a North Korea-related book by an author who had a similar name.


9 posted on 11/08/2011 6:14:05 PM PST by gaijin
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To: Kaslin

I’m not sure what was to be expected otherwise. Were in the tank which means were not buying as much of their crap which means they go in the tank too. I know we are not the only buyers; but we did define the top tier.


10 posted on 11/08/2011 6:14:43 PM PST by Michael Barnes (Obamaa+ Downgrade)
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To: gaijin

You could indeed be right about Taiwan. I think it might be a race though between Taiwan and widespread and possibly high tech coordinated riots through out rural and Urban China. Especially if there is a major drought.

Because of all of the now polluted former farmland by Factories with no pollution controls the amount of arable land in China has decreased greatly.

And those factories were permitted because anything that reduced manufacturing costs was desirable in the need to reduce or eliminate competing factories or industries in the United States.

Now... Now it is coming back to bite them in the buttocks. In my opinion the great gamble they made is going to go bust on them.


11 posted on 11/08/2011 6:15:43 PM PST by The Working Man (The mantra for BO's reign...."No Child Left a Dime")
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To: Kaslin

Not sure how this will play out. China’s economy is nowhere near as hollowed out as ours. They’re more reliant on investment and trade economically, whereas gummint and housing were our economic bedrock when the crisis hit.


12 posted on 11/08/2011 7:06:05 PM PST by CowboyJay (Cain is able.)
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To: Kaslin

Very informative.


13 posted on 11/08/2011 7:08:17 PM PST by BunnySlippers (I LOVE BULL MARKETS . . .)
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To: Mike Darancette

I don’t think they’ll go peacefully.


14 posted on 11/08/2011 7:09:24 PM PST by BunnySlippers (I LOVE BULL MARKETS . . .)
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To: Kaslin

bttt


15 posted on 11/08/2011 7:10:20 PM PST by MinorityRepublican
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To: Kaslin

It was hard to keep up their fake accounting I guess.


16 posted on 11/08/2011 7:15:36 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: gaijin

I think the Spratly Islands might come first though. As a warm up?


17 posted on 11/08/2011 7:17:22 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: CowboyJay

Many of the factories and corporations in China are owned by government. The PLA owns a bunch of them too. ALso many industries in China are owned 49% by government.

They had their own “stimulus” building many new cities that sit empty and will crumble before anyone could expect to be able to afford them. Their domestic economy is still pretty much controlled by government. Outside of the major cities I wonder how many residents will even feel any collapse?


18 posted on 11/08/2011 7:21:42 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: GeronL

My info is that outside the major cities, they are 90% subsistence farming, though they have started to modernize their ag sector in the last 5 years. Ag will probably stay solid and I agree with you that most rural farmers probably wouldn’t skip a beat if Beijing burned to the ground.

I’m curious as to whether they’ll let the ghost cities crumble, or if they’ll actually act like commies for a change and just assign the houses on a lottery basis or something.

Along with being the world’s largest steel & chemical producer by a pretty wide margin, there are a few light manufacturing industries that are practically Chinese monopolies at this point. That gives them some resistance to downturns. I think the big question is whether or not that part of their economy will just soldier on with or without the west and pull them through the other side like it did back in 2008.

Quite a few pundits thought that a US recession necessarily meant they were doomed too. Not so. They had 1-2 quarters of slow growth, and it was pretty much back to business as usual for them.

We live in interesting times. =P


19 posted on 11/08/2011 7:42:12 PM PST by CowboyJay (Cain is able.)
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To: The Working Man

Demanding payment for our debts held by the Chinese in the form of food is not unlikely.


20 posted on 11/08/2011 7:49:44 PM PST by tbw2
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To: CowboyJay

The housing in those new cities would be money losers if handed out. Who would live there? Are there any jobs? Have you seen that one Al Jazeera video report on one of these cities? That was years ago, I imagine the crumbling is further along now.


21 posted on 11/08/2011 7:51:05 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: CowboyJay

http://www.youtube.com/watch?v=0h7V3Twb-Qk

There is that video from ‘09


22 posted on 11/08/2011 7:52:27 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: CowboyJay

here is another video:

http://www.youtube.com/watch?v=wm7rOKT151Y&feature=related


23 posted on 11/08/2011 7:54:38 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: GeronL

Thanks for the links. Maybe we could have OWS occupy the ghost cities. They seem to get by OK with no visible means of support.


24 posted on 11/08/2011 8:23:16 PM PST by CowboyJay (Cain is able.)
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To: CowboyJay

“Maybe we could have OWS occupy the ghost cities.”

Great idea. And with less illegals entering the US, this could make us a net exporter of rioters.


25 posted on 11/08/2011 11:07:30 PM PST by haroldeveryman
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To: CowboyJay
China’s economy is nowhere near as hollowed out as ours.

I've read that construction was 60% of China's GDP in 2008-2009. Ours is under 4%. In addition, China's one-child policy has been effective (as opposed to merely being in effect) since about 1981. Their demographic bomb is going to be as bad as Italy's.

Of all the industrialized nations, India has the best demographics, followed (not closely) by the U.S. It's most likely going to be a replay of the 1930s, with China in the role of the U.S., and the U.S. in the role of Britain.

It could get much worse. Unless we stop burning food, it could get as ugly as the 1790s were in France. Various organizations, including Soros funds and several U.S. university endowments, are buying up massive amounts of farmland, as is China. Debts and deficits do matter, as do assets and earnings.

26 posted on 11/08/2011 11:12:18 PM PST by bIlluminati (Don't just hope for change, work for change in 2011-2012.)
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To: Kaslin

Always important to remember that 35% of China’s people are directly involved in agriculture.

In the USA that number is 6%, and we export more food than any country in the world.

I’ve never understand how people can think of China as a great economic powerhouse when 20% of their people live at or below the poverty level in rural villages.


27 posted on 11/09/2011 1:24:46 AM PST by zeestephen
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To: mylife
The Chinese are great businessmen and gamblers -- look at the Chinese communities in Taiwan, Hong Kong, Singapore, Malaysia and the Philippines.

however, 60+ years of communism has destroyed much of that business mindset on the mainland.

28 posted on 11/09/2011 1:27:55 AM PST by Cronos
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To: mylife

Though also, the abacus was invented c 2700 BC by the Sumerians.


29 posted on 11/09/2011 1:29:12 AM PST by Cronos
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To: zeestephen
"how people can think of China as a great economic powerhouse"

It's the industrial production. They produce nearly as much steel as the rest of the world combined, and their chemical industry is about 4 times the size of ours already. Not bad considering they basically spotted us a 100 yr head start in terms of development.
30 posted on 11/09/2011 6:11:14 AM PST by CowboyJay (Cain is able.)
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To: CowboyJay
“.....their chemical industry is about 4 times the size of ours already.”

Can you recall where you read that?

Friendly question, not a source challenge.

I believe the USA is the largest chemical consumer in the world.

As recently as 5 years ago, I believe the USA and Germany were the #1 and #2 chemical exporters.

I certainly do not disagree that China is a manufacturing and industrial powerhouse.

My issue has always been “GDP per Capita.”

USA is close to $50,000 per capita.

China, maybe $9,000, and probably lower.

I just don't buy in to the whole “BRIC” economic mythology.

Brazil - about $12,000.

Russia - about $15,000.

India - about $4,000.

Sure, their “growth” is impressive.

But if the BRIC’s are really going to lead economic growth in this century, heaven help us!

31 posted on 11/09/2011 9:40:29 AM PST by zeestephen
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To: zeestephen
In terms of dollar value, we're still a little ways ahead of them (they are solidly in 2nd), but in sheer gallons they already out-produce us by a wide margin. Chinese stock reactants are already used in the production of ~80% of our pharmaceuticals. The lion's share of worldwide chemical production capacity added in the last 10 years (along with a majority of the R&D labs built) has been in mainland Asia.

I could swear I just peeked at the numbers yesterday, but cannot find the exact link. You may find these links interesting, though:

China Chemicals Industry
Wikipedia - Chemical Industry
ICCA (chem trade association) Report

GDP per capita is a poor metric, especially as a measure of industrial output, IMO. Things are included in GDP that really cannot rightly be considered "products" much less industrial output, and it is largely dependent on questionable relative currency valuations.

Whether you believe it or not, China's industrial sector (ex-manufacturing) already dwarfs ours. I'd agree that's not necessarily a positive development from an American perspective, but it is what it is.
32 posted on 11/09/2011 1:09:44 PM PST by CowboyJay (Cain is able.)
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To: CowboyJay

“Not bad considering they basically spotted us a 100 yr head start in terms of development. “

That’s a really generous way to put it, considering that most of their technology was piggy-backed on western product development over many decades.

Numerous companies from the West, especially high-tech companies, built factories in China and set up design centers. They gave them the technology base and jump-started their capabilities. The Chinese are masters at corporate espionage as well, so they have acquired lots of other information they needed.

I’m not saying they are not smart, I’m just saying that they didn’t start from zero, not by a long shot.


33 posted on 11/11/2011 6:26:05 PM PST by webstersII
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