Posts Tagged ‘chinese economy’

Conflicting Views On China’s Slowing Economic Growth

April 16th, 2014 Comments off

Amid growing indications that China’s rapidly expanding public and private debt foreshadows a major economic and financial upheaval in the future, the latest official GDP quarterly data is stimulating divergent views from analysts. According to Beijing, GDP grew by a “better than expected”  7.4 percent in Q1 of 2014. However, this is a further indicator that official growth in China is slowing, as Q4 of 2013 revealed GDP growth of 7.7 percent.

Two things to keep in mind; China’s statistics, as in many other economies, are opaque, perhaps much more so with Beijing. Additionally, the Chinese economy functions with far different dynamics than is the case with a Western advanced economy. Official GDP growth reflects massive infrastructure spending funded by credit expansion, alongside export-based manufacturing growth, with consumer spending a low component of economic activity in comparison with Western countries.

What does seem clear is that the economy’s double digit growth rates of the past are over, the trend in GDP growth is a slowdown, supposedly engineered by Beijing to lay the foundation for more sustainable growth in the future. However, declining GDP growth  rates combined with increasing signs of a looming debt crisis add further doubts about the future health of the world’s second largest economy


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Hillary Clinton Nude


Rising Concern On China Debt

April 9th, 2014 Comments off

There is increasing concern at the rise in public and private debt in China relative to GDP. This concern is across the board: internal and external, public policymakers and private financial interests and investors. Some commentators are following the path of false optimism; no matter the size of China’s debt, the second largest economy in the world has the capacity to contain the problem-so they claim. That remains to be seen.

By some estimates,  Chinese financial institutions are holding up to $3 trillion is bad or at least questionable debt, equivalent to America’s subprime mortgages that exploded in 2008, ushering in the global economic crisis. If Beijing is unable to contain the growing debt problem and it were to explode, the contagion would be at least as virulent as the impact on the global economy due to the subprime meltdown in the United States.

Of all the somber economic trends underway-and there are many-China’s accumulating public and private debt problems are the most vexatious.


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Hillary Clinton Nude


China Economic Growth Is Stagnating

January 23rd, 2014 Comments off

According to China’s National Bureau of Statistics, the nation’s GDP in 2013 grew by 7.7 percent over the prior year, beating the original forecast of 7.5 percent, albeit by a small margin. On the surface, this is an impressive performance that the U.S. and Eurozone can only dream of emulating. However, a caveat is always required in assessing official Chinese economic data. Not only is Beijing suspect and at times manipulative in compiling the nation’s economic statistics (as are many other countries), it must be remembered that China’s GDP growth is seeded with massive borrowing by local governments, which in turn invest in vast infrastructure projects, which often have little real economic utility, such as uninhabited housing projects.

The truly important news with the 2013 GDP numbers from China is that they represent a marked slowdown in economic growth, when relying on just official government economic data. The current level of GDP growth is far removed from the brighter days when China achieved double digit growth year after year, for a decade or more. It is clear that China’s remarkable economic growth is slowing down, and that could be a preview for a period of much higher unemployment with concomitant political instability.



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Hillary Clinton Nude


Hillary Clinton Nude





China’s Local Government Debt Explodes

January 2nd, 2014 Comments off

While much of the discourse on public debt and deficits among economists and media pundits has been related to  the Eurozone Crisis, especially regarding Greece, or major developed economies such as the United States and Japan, much less has been heard about China’s fiscal status. Yet, one of the most rapidly growing factors of public debt is occurring right now, in China, largely under the radar of the so-called fiscal prophets of doom.

At present, according to always questionable  official statistics from Beijing, China’s total public debt represents 58 percent of the nation’s GDP. This is significantly lower than is the case with Japan and the United States. However, it is the rate of growth of that debt, particularly in connection with Chinese local governing authorities, that may begin to sound alarm bells. It appears that following the global economic and financial crisis of 2008, cities across China embarked on a massive borrowing and spending binge in a super-charged Keynesian effort to sustain China’s traditional  high annual rate of economic growth.

China’s  National Audit Office (NAO), following directives from the national authorities in  Beijing, undertook an extensive accounting and auditing of the books of all of  the nation’s local spending authorities. What they discovered was that in only three years, China’s local public debt grew by a staggering 70 percent, reaching a total of 17.7 trillion yuan, equivalent to nearly three trillion U.S. dollars. Another statistic is sounding alarm bells in China; up to 80 percent of all bank lending in China during the period following the onset of the global economic crisis was to local governments.

The vast spending spree by city governments across China has erected vast quantities of housing stock and commercial edifices that are unoccupied and infrastructure projects that are underutilized. Some economists, particularly outside of China, may defend this massive and largely uncontrolled public debt expansion as enlightened public policy, aimed at preventing high rates of unemployment in China. However, China’s national leadership is clearly worried about this stunning rate of growth in public debt at the local level, far outstripping real economic growth rates.  Beijing knows that seeding official GDP growth rates with an  unrestrained tidal wave of red ink is not a sustainable economic path to pursue. The dilemma for Beijing’s economic policymakers is this; now that they know  they have a serious problem of exploding public debt, what options are open to them that impose the least degradation to their cherished high rate of annual GDP growth? Their ultimate answer will inevitably have profound implications for the entire global economy.


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Hillary Clinton Nude


Hillary Clinton Nude


Hillary Clinton Nude

China Economic Slowdown

July 18th, 2013 Comments off

Official figures from Beijing indicate  that the Chinese economy grew by 7.5 percent in Q2 of 2013. In a developed economy, that would be considered stellar growth. In China, however, where economic dynamics (and economic data transparency) functions acutely different from a typical advanced economy, this number is alarming. It represents a sharp contraction in growth,  far removed from the sweet days prior to the onset of the global economic crisis, when annual growth rates routinely exceeded 10 percent.

China’s economic model was based on export led growth, facilitated by low labor costs. As recession-plagued Europe, in particular, can no longer sustain a growth in exports from China, fiscal and monetary stimulus is substituting in an effort to extract some level of expansion in China’s economy. What is in fact occurring is the proliferation of massive bubbles, particularly in real estate. Much of the GDP growth  in China is based on industrial, commercial and especially residential real estate construction funded by easy credit. The number of unoccupied homes and office complexes is rising, leaving China’s economy vulnerable to massive bubble implosions on the level that afflicted the U.S. property market in 2007.

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Hillary Clinton Nude


Hillary Clinton Nude


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China’s Economy Is Contracting In The Industrial Sector

December 2nd, 2011 Comments off

The figures for China’s purchasing managers’ index (PMI) for November registered a mere 49 points, according to the China Federation of Logistics and Purchasing. This figure represents a contraction in the crucial Chinese manufacturing sector. It has been due to its role as factory to the world that China’s GDP has been propelled to the second largest in the world. The latest PMI has been amplified by a similar index compiled by HSBC, which is also reporting a contraction in the industrial sector. This dismal news on the supposedly rapidly growing Chinese economy is being attributed to a decrease in exports to the Eurozone countries, now mired in an ever-worsening sovereign debt crisis. The data on China’s PMI is the worst since February 2009, at the tail-end of the free fall contraction in the global economy after the onset of the global economic crisis in the fall of 2008.

How worried should one be about the industrial contraction in China? Many observers have already pointed out that China’s rapid growth at a time of economic decline and stagnation among advanced economies was in large part artificially induced by massive government spending, in particular on uninhabited apartment complexes and unoccupied shopping malls. But more importantly, how worried is China about the economic health of its largest customers, in both the Euozone/UK region and the United States? This is what Chinese Vice Finance Minister Zhu Guangyao said about the current global economic crisis: “The current global crisis may be in some way more severe and challenging than that of 2008 after the collapse of Lehman Brothers.”

The Chinese political leadership is clearly worried about the spillover effects of the Eurozone debt crisis on China. This has led to some radical about-turns in economic policymaking. Concerns about inflation and banks with a significant portfolio of bad loans have been discarded. The authorities in Beijing are again focused on growth at all costs, involving the loosening of monetary policies and requirements on Chinese banks for minimal provision for reserves against bad loans. However, with a much smaller proportion of its economy driven by domestic consumption compared to the Eurozone, U.K. and U.S., there is only so much the government can do to induce growth at a time of stagnation or contraction of its exports to its largest customers. In the final analysis, China cannot go on indefinitely building uninhabited cities as a means of creating “growth” in its GDP. 

Despite all the talk in economic circles about the large economies in East Asia being “decoupled” from the advanced economies in Europe and North America, China is as much a prisoner of the impact of the Eurozone debt crisis as is America-just as Europe and China were prisoners of the subprime mortgage meltdown in the United States. In our integrated global economy, no one is immune to the effects of a legacy of bad economic and fiscal policymaking in Washington and Brussels, least of all Beijing.



Officer Larry of the NYPD is on his way to Zuccotti Park in lower Manhattan to arrest peaceful protesters involved with the Occupy Wall Street movement. Being a public spirited member of the New York Police Department, Officer Larry does remind us that there is a global economic crisis underway that rivals the Great Depression of the 1930s.






China Faces Growing Labor Unrest Amid Wave of Strikes

June 21st, 2010 Comments off

It is the epitome of all ironies. A supposedly workers Marxist/Communist political entity, the Peoples Republic of China, is in reality capitalism’s ultimate creation: an authoritarian  workshop for multinational corporations, that keeps wages at  the lowest possible levels, while making strikes and plant shutdowns by workers strictly illegal. This enforced low-wage corporate model is the basis behind China’s export boom and economic ascendancy. However, despite government pressure, cracks are beginning to appear in the façade.

Strikes are breaking out throughout China. The factory of the world is in revolt, with workers unrest growing like wildfire. Most recently, plants that produce parts for the Japanese automakers Honda and Toyota have been hit by labor shutdowns. In virtually every case that has become publicly exposed, the employers have been forced to provide large pay rises as the price of ending the strike. Illegal or not, the strike has emerged as a potent and popular labor weapon across the shop floors of the factory of the world.

There are profound economic and political ramifications related to China’s growing labor unrest. Inflation is increasing in China amid asset bubbles fed by Beijing’s loose fiscal and monetary policies. The Chinese workers are becoming increasingly militant in reacting to the widening gap between rich and poor in this supposedly classless communist nation. What is at risk is the very essence of what has thus far enabled China to compete on the world stage and emerge as the primary global exporter. Also at risk is the ability of the central government to profit from a low wage economy, in the process building up huge cash reserves. In large part, these reserves are what has enabled the Chinese sovereign fund to invest in U.S. Treasuries.

This is potentially a huge story, bigger than many currently appreciate, given that the Chinese authorities have probably suppressed the news concerning most strikes and workers demonstrations in China.  What we have learned about the strikes at Honda and Toyota plants in China is merely the tip of the iceberg of labor discontent in China, a factor that may in time create severe obstacles for the Chinese and global economy.

Will China’s Economic Crisis Metastasize Due to Her Stimulus Spending?

July 12th, 2009 Comments off

With a growing consensus by many observers that massive  public borrowing by the U.S. and other major developed economies to fund  economic stimulus  programs has largely failed to stem the free fall in employment numbers and achieve its primary objective, it appears that the remaining hope of eternal optimists is China. In fact, the most hopeful projections of a return to global economic growth are based almost entirely on the Chinese economy. How ironic that the saviour of global capitalism is determined to be the largest Communist state still in existence. Indeed, the latest IMF forecast of a return to modest growth is predicated on the aggregate projected growth of the Chinese economy  being sufficient to lift the net global growth figures for 2010.

How realistic is this iconoclast faith in the capacity of China to lift the entire planet out of the doldrums of the  Global Economic Crisis? In all probability, about as grounded in reality as U.S. Federal Reserve Chairman Ben Bernanke’s gospel of green shoots sprouting from the muck of financial and economic decay.

We live in a surreal universe of economic analogies. Ben Bernanke has become a horticulturalist, preaching the botanical gospel of green shoots.  Wall Street cheerleaders have displaced economic modeling with astronomy, peering through an opaque telescopic lens in search of enigmatic glimmers of economic light amid the nocturnal darkness of outer space. Policymakers are reassuring  their anxious publics by becoming weathermen of financial forecasting, boasting of meteorological evidence that the economic storm clouds are abating. But strangest of all is the collective obsession of the economic establishment in much of the developed world with oriental soothsaying.  They are reading tea leaves and  breaking apart Chinese fortune cookies in order to fathom what direction China’s economic policy is headed, convinced that the old global economic order they are so desperate to revive and preserve depends on decisions being made in Beijing.

The single most important policy decision made by China’s ruling circles was to enact an economic stimulus program of their own, totalling nearly $600 billion dollars. At first, desperate American and European economists and investors were fearful that the Chinese deficit-driven response to the Global Economic Crisis was not substantial enough. However, it is now recognized that as a proportion of GDP, China’s economic stimulus is by far the largest in the world. It is far larger than the Obama stimulus package, for example, when calculated as a proportion of the total national GDP. Furthermore, the Chinese are executing their response to the synchronized global recession at a much faster pace than just about any other economy, including the United States.

On paper, the Chinese fiscal stimulus package appears to be bearing fruit. Projected growth rates for the Chinese economy in 2009 are currently predicted to exceed 7%. That figure alone is responsible for the overall negative global growth rate being forecasted by the World Bank not appearing even  more sombre. No wonder so many policymakers and private financiers are looking gleefully at China’s economy as the global restorer of capitalism.

When one looks beyond the manicured statistics, however, there appears a very dangerous side to China’s economic stimulus spending that may, in the long-term, make things much worse for China and the overall global economy. The Chinese economy was based on an economic model that is now exposed as fundamentally flawed. Essentially, China functions as the world’s factory, while its frugal citizens provided the savings that were transformed into credit that enabled U.S. consumers, in particular, to buy the output of China’s assembly plants. The financial tsunami and credit crunch that has afflicted the world has broken that model, reflected in the decline in Chinese exports from a year ago by 30%. In theory, the Chinese stimulus program is supposed to make up for the contraction in exports by boosting domestic demand, so as to arrest  the rise in unemployment. However, a different dynamic appears to be underway in China.

As dictated by the authorities in Beijing, staggering amounts of cash are being pumped into the economy. To illustrate the flow of capital being stimulated  by China’s fiscal policy measures, in the first half of 2009 Chinese banks loaned $1 trillion. By way of comparison, in all of 2008 only $600 billion was provided to borrowers by China’s banks and financial institutions. With credit now flowing so free and easy towards Chinese companies, they are responding not by engaging in enhancing production and employment, but in rash speculation.  In effect, the corporate sector in China is utilizing the stimulus money being doled out by Beijing to engage in speculation involving commodities, real estate and equities. In fact, Chinese companies are now establishing dedicated departments not focussed on the intricacies of marketing, sales, R & D and production, but on the sole task of speculating with the money being literally forced down their throats by China’s banks.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, 



Easy credit leading to speculation and asset bubbles seems to be the path China is embarked upon. Where have we seen this before? In the United States, as a result of the Alan Greenspan bubble, when the Fed set interest rates too low, setting the stage for the subprime mortgage collapse in the United States.

As with deficit-driven stimulus spending elsewhere, China’s fiscal response to the economic crisis is a stop-gap measure, and cannot be continued indefinitely. What happens when Beijing halts the pump-priming and slows down the printing presses? A strong possibility will be the mother of all asset bubble deflations.

The pundits who believe that China’s economic policies are the most important factor in the ultimate outcome of the current Global Economic Crisis may be correct, but in a manner that is an inversion of their hopes. Rather than rescue the global economy, China’s debt-induced credit fever may be setting the stage for an asset implosion of such severe intensity, it may be the final stage leading to an irreversible global depression.

Will the Chinese Economy Save the World?

June 3rd, 2009 Comments off
Like a pilgrim seeking the altar of St. Jude, patron saint of hopeless causes, U.S. Treasury Secretary Timothy Geithner journeyed to China in search of salvation. It is not spiritual healing, however, that Geithner seeks but the most material form of assistance; sovereign loans to finance the growing debt of the United States, in the form of purchases of Treasuries.
Geithner symbolizes the collective desperation of elites throughout the crippled global economy, who look to China as the only and best hope for solving the global financial and economic crisis. And by focusing on specific economic data in a highly selective manner, analysts and economists are able to find glimmers of hope to salivate over. While the global economy overall will undergo collective contraction for the first time since World War II, the Chinese economy is expected to grow by at least 6% in 2009. Recent trends reveal some areas of increase in domestic consumption, such as purchases of automobiles. There has been in several instances an increase in manufacturing output, contributing to a rise in certain commodity prices as China’s appetite for raw materials grows. However, look beyond the spin-doctors and a somewhat different economic picture emerges.
Where domestic consumption has increased, this has been in large part due to tax incentives being offered by the authorities in Beijing to stimulate demand. This is a short-term fix, and not indicative of a sustained trend. More importantly, China must maintain a very high rate of annual growth in order to keep employment levels steady. A growth rate in the range of 6%, a figure that would be considered miraculous in much of the rest of the world, is insufficient to prevent a rise in unemployment. Since the onset of the Global Economic Crisis, more than 25 million migrant workers have lost their jobs, as factories by the thousands that depended on export markets are shuttered.
Another question mark is the state of China’s banks. Largely still controlled by the state, there has been a process of liberalization underway, and thus far the Chinese banking system appears to have weathered the economic storm better than most. However, only a few years prior to the onset of the global financial and economic crisis, China’s banks were rife with corruption and mismanagement, leading to a vast accumulation of toxic assets on their balance sheets. In 2002 it was estimated that Chinese banks carried a half trillion dollars in non-performing loans; it is not clear what that number is currently, or how vulnerable Chinese banks are to their own nation’s potential real estate bubble.

Much of the world is betting on the success of China’s own stimulus spending program, which equals nearly $600 billion. However, despite the impressive aggregate size of the Chinese economy, per capita income still ranks very low, standing at 107 out of 179 nations, or about $2,000. The capacity of the economy to compensate for demand destruction in its principal export markets through comparable increases in domestic consumption does not appear to be suffcient enough to create a basis to hang the global economy on. What is more likely is that China will spend what it can, borrowing from its sovereign wealth funds and reserves, to inhibit the growth of unemployment so as to maintain social cohesion.

As for Geithner’s agenda, his number one priority remains China continuing in its role as America’s principal banker. Like large debtors everywhere, the U.S. Treasury Secretary and Obama administration actually believe they have China over a barrel. The U.S. was just a larger version of AIG or Citigroup in their framework; too big to fail, as China’s major export market. For a time, it appeared that China’s political and economic leadership reluctantly agreed. Recall the words of Luo Ping, a director-general at the China Banking Regulatory Commission, who told journalists back in February that, “Except for U.S. Treasuries, what can you hold? U.S. Treasuries are the safe haven. For everyone, including China, it is the only option. We hate you guys. Once you start issuing $1 trillion to $2 trillion [of Treasury bonds] we know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do.”

Now, however, there are growing indications that a major reassessment is underway among China’s principal economic policymakers regarding their country’s huge investment in U.S. government debt, currently in the range of $1 trillion. A growing number of Chinese officials are on record as believing that the U.S. dollar will eventually lose its role as the world reserve currency. And while in the short-term China will continue to purchase U.S. Treasuries, its own domestic needs and financial limitations are likely to restrict those investments to a level that represents only a fraction of the vastly exploding U.S. government borrowing requirements.

Ultimately, China does not see itself as the St. Jude of America, but as a sovereign nation with an old civilization, downtrodden for the last two centuries by Western powers and Japan, but which is on the verge of emerging from the Global Economic Crisis as the preeminent world financial power. It therefore will make decisions on how it allocates its resources and financial reserves not based on America’s desperate borrowing needs to finance its profligate budget deficits, but on serving the supreme long-term national and strategic interests of the People’s Republic of China.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, 






China And The Global Economic Crisis

March 7th, 2009 Comments off
When Chinese Premier Wen Jiabao spoke before 3,000 legislators in the Great Hall of the People in Beijing, his words were broadcast live to a vast audience, not only in China but also throughout the globe. The most important economists, financial analysts and entrepreneurs on our planet attentively dissected everything Wen said, be it overtly expressed or subtlety placed between the lines. For it is now to China, not the United States, that the nations impacted by the Global Economic Crisis look to for salvation, and assurance that a synchronized global recession does not become an L-shaped depression of long duration.
Based on the declines in stock markets throughout the world, it appears that Premier Wen disappointed those in the West, Japan and the U.S. desperately praying that he would go far beyond the earlier promise of a 4 trillion-yuan stimulus package, equivalent to about $586 billion, to enhance domestic demand in China. Wen stuck with the 4 trillion-yuan figure, adding details as to where the stimulus package will be directed. Wen indicated that the priorities of the Chinese government would include infrastructure investment, tax reform, industrial restructuring, scientific innovation, social welfare and increasing urban and rural employment. He also indicated that the annual budget would incur a deficit of about $140 billion, equal to about 3% of China’s GDP.
Wen’s external audience had placed their bets on a significantly larger Chinese stimulus package of between $1 trillion and $1.5 trillion. However, the Chinese leadership has apparently made a far more sober and strategic calculation with respect to the Global Economic Crisis than has been the case with the political and financial elites in the United States, United Kingdom, Japan and the Eurozone. The primary concern in Beijing is maintaining social stability during a likely long economic depression, with many unpredictable and dangerous manifestations of this global disaster still in front of us. While accepting some degree of deficit spending will be necessary to modify the repercussions to China’s employment situation due to global demand destruction afflicting major components of China’s export-oriented industrial base, limits have clearly been imposed that do not compromise the nation’s long-term fiscal health.
Compare the 3% deficit forecast in China with the Obama administration’s upcoming deficit of $1.75 trillion, a staggering sum of borrowed money, equal to 12% of America’s GDP. Unlike the United States, which is the largest debtor nation in the world, China has substantial reserves of foreign currency, sovereign investments and domestic savings, enabling it to fund its deficits and stimulus spending without requiring external sources of credit. In the long term, the far more cautious and strategic approach of China towards meeting the challenge of the Global Economic Crisis will better serve her long-term national interests amid an unstable and uncertain global future.

There is another inference to draw from Premier Wen’s presentation on the economic problems confronting Beijing. While not belittling the acute and dangerous challenges that the Global Economic Crisis poses for China, the nation’s leadership seems to have taken a long view that suggests the following: by playing her cards carefully, China may be able to exploit the Global Economic Crisis in such a manner that she will emerge as the dominant economic power in the world.

With the United States reduced to literally begging China to buy her Treasuries, a vital imperative necessary to finance Washington’s stratospheric deficits, it may be that China is already positioned for global economic dominance, so long as she succeeds in maintaining her social cohesion during the difficult years that lie ahead.



For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,