Skip to comments.5 Signs of the Chinese Economic Apocalypse
Posted on 07/20/2012 12:04:33 AM PDT by Cronos
Although China's outlook may still be positive by, say, European standards, the numbers show that the country's storied growth engine has slipped out of gear. Businesses are taking fewer loans. Manufacturing output has tanked. Interest rates have unexpectedly been cut. Imports are flat. GDP growth projections are down, with some arguing that China might already be in recession. In March, Premier Wen Jiabao put the 2012 growth target at 7.5 percent
Here are five real-world signs of China's economic malaise.
Chinese prosecutors have said that close to 19,000 officials have been caught in the last 12 years while trying to flee overseas with money earned illegally
(Excerpt) Read more at foreignpolicy.com ...
Hopefully the price of oil and gasoline will come down. Perhaps they will be willing to sell more of their rare earth minerals.
Here is an interesting tid bit to add to the mix. There are now grumblings that government worker pensions are out of line with those of the private sector.
A farmer will receive retirement pension of 50RMB a month.
A working in a factory will receive 1000RMB a month.
A post officer worker will receive 4000RMB a month.
A higher level government worker will receive 7000RMB a month.
There are grumblings that government pensions are too high compared to the private sector. That sounds familiar.
Unlike here where the officials face little or no penalty, the 19,000 in china that got caught face significant jail time.
“how will this hit the world economy?”
It already did in the sense that since the Red Chinese growth was fueled by exports to the West, and the West (in part due to losing those manufacturing jobs) can now buy less of those exports, the growth must sputter. Ten years ago here in NJ we had Red Chinese shipping containers sitting empty in our ports because their contents had been distributed here but we had nothing to send back to sell to them; now basically we have Red Chinese shipping containers sitting full in our ports because we no longer have money to buy their contents anyway.
China’s growth must create inflation.
Inflation means wages rise (along with prices).
It is logical and normal for inflation to hit an emerging economy. China’s citizens have some buying power, so they want to consume more of their own production, but need more buying power.
China’s gov’t did not want wages to rise because that is their primary manufacturing advantage for exports, so they fought against inflation.
The second is their currency, but we will avoid that discussion for now.
Unfortunately, the only way to fight inflation is to slow growth.
Now China’s growth is far, far slower than what the gov’t reports. It is probably less than 4%.
They are now in a recession.
It will remain there until worldwide demand picks up or until they allow wages to inflate enough so their own people can consume some of their production.
Private equity investment in Asia dropped 24% in the first half of 2012. 18 of the 30 Asian equity firms that went belly-up this year were yuan based. Investors are moving away from China and targeting Australia and Singapore. The Riadys are dumping various holdings in Indonesia. Lots of investor interest in Indonesian health care sector.
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