Tuesday, December 29, 2009

|| Satyameva Jayate || » Weekend Reading: Worrying about China…

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    • Three brief excerpts for the weekend on why China is becoming a worry for the global economy and why those numbers are hard to believe
    • First, an extract from China has now become the biggest risk to the world economy by Ambrose Evans-Pritchard:
    • At some point, American workers will rebel. US unemployment is already 17.5pc under the broad “U6″ gauge followed by Barack Obama. Realty Track said that 332,000 properties were foreclosed in October alone. More Americans have lost their homes this year than during the entire decade of the Great Depression. A backlog of 7m homes is awaiting likely seizure by lenders. If you are not paying attention to this political time-bomb, perhaps you should.

      …much of Beijing’s $600bn stimulus has been spent building yet more plant and infrastructure so that China can ship yet more goods, or has leaked into property and stocks.

      Credit has exploded. Allocated by Maoist bosses for political purposes, it has become absurd. China is rolling as much steel as the next eight producers combined. It is churning more cement than the rest of the world. Fixed investment is up 53pc this year. Once you know that Hunan authorities have torn down two miles of modern flyway so that they can soak up stimulus by building it again, or that the newly-built city of Ordos is sitting empty in Inner Mongolia, you know what must come next.

    • View frm Shangri-La, Hong Kong
    • View from Shangri-La, Hong Kong
    • If this has not sobered you enough, read these excerpts from China’s record debt has economists worried by Bill Powell:
    • The U.S. fueled its housing and consumption bubbles by providing easy credit. China seems headed in the same direction, although the victims would be different this time.

      In the first nine months of the year, Beijing has shoveled $1.27 trillion in new loans into the economy, up 136% from the same period last year. That money has gone to three main areas: infrastructure, manufacturing, and real estate.

      …Moreover, an increasing number of Chinese loans are being funneled into projects unlikely to generate an attractive economic return. From 2000 to 2008 it took just $1.50 in new credit to generate $1 of GDP growth. Now that ratio is 7 to 1. (In the U.S., just before the financial crisis hit, the ratio was only 4 to 1.)

    • And finally, from How China Stiffed the World in Copenhagen by John Lee:
    • Beijing is completely aware that these numbers are wildly inaccurate despite aggressively defending them after release. For the sake of its image and reputation, Beijing still wants to assure outsiders that it remains in charge even though in important respects it is not. It would not want a team of independent experts seeing for themselves the deception, dysfunction, and lawlessness that takes place throughout China under the watch of unaccountable local officials.

Posted from Diigo. The rest of my favorite links are here.