Monday, April 30, 2012

China and rebalancing

I thought some humor was needed for an image
that seems to be hauntingly foreboding.
Some news citizens,

The Wall Street Journal has this article on China's economy cooling and an Op/Ed at Forbes about China starting to put some screws into foreign car makers.  Now what does it mean?  This take me back to when the US economy was starting to slow down in early 2007; back when the scourge known as Sex in the City was still in the memories of many latte addled women.  Well one thing I remember was that many economic analysts were trying to put a positive spin on the numbers, and it feels the same here.  Yes Chinese disposable income has grown, but one quarter of growth in consumer spending doesn't mean anything, and why is it that so many periodicals and analysts focus on quarterly statistics?  In my mind these fundamental facts are true about China.

They largely have followed Japans economic model, there are serious limitations to what they are doing. A key thing that we forget about an economy, is that it isn't growth rates, but profitability that determines real growth. Not only China is doing this, but this has been a strategy of Asian economies for a long time. Remember the Asian tigers of the early 90s, followed by the Asian Financial crisis later that decade?

China is incredibly poor, and very populated.  Now this has helped given that they have a large and cheap pool of workers that have allowed them to build their export economy; however, one thing that you cannot forget, is that their demographics is terrible.  A fertility rate of 1.5 is not good, it is below the replacement rate, and their culture and society is not one that is conducive to immigration.  This means China is racing against the clock.  They, and by they I mean the CCP, need to get their economy to a level where they can take the economic hit and not send the nation into chaos.

But that is already happening.  Protests are rampant, and no these aren't protests like they are in the United States.  These are people with problems far greater than our own protesting a nation that actively tries to suppress them.  Remember the Uighyr protests? The Tibetan protests?  They were suppressed very harshly by the Chinese.  And I know that some would brush off and say that most of the deaths were the result of the riots themselves and not the government, but when was the last time you say paramilitary groups, think FBI, NSA, or CIA, suppress protests in the United States? As bad as we have gotten we are no where near the levels of that China is when it comes to being a police state.  And the fact that more and more protests are occurring in China, and least we forget, the CCP is amidst its own internal struggle at the moment, these are creating conditions that show a country that is having trouble and is not as strong as we believe them to be. 

I haven't gotten into the Chinese real estate bubble, stimulus bills, or the boon doggle high speed rail has been for them, which really just illustrate the other unseen malinvestment that goes on in that nation.

Given these items, it is highly doubtful that Chinas' economy is 'rebalancing' it is more likely the economy is on the verge of crashing and the party leaders are scrambling for a way to prevent it.  Even a slow down, and the possible unrest they would face, is better than a crash and the 100% likely hood of unrest, with the small possibility of rebellion.

As always, humbly yours. 

Cogitans Iuvenis

And yes, winter is coming fellow citizens. I believe it wholeheartedly. When Caetlynn Stark talks about the knights of summer, she is describing our generation.  What we are experiencing now is the equivalent to the war of the five kings, all the while a bigger menance is lurking in the backgrounds.  Do not be like the Lannisters, the Baratheons, Tullys, or Martells.  Be like the Starks, likle the Nights Watch.

1 comment:

  1. Don't know much about Game of Thrones...couldn't even watch the HBO series. So I dunno what being like the Starks or Tullys is like, but I've been saying to people for years...China is in a worse situation the US is in, China just hides their debts better than us.

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Seattle resident whose real name is Kevin Daniels. This blog covers the following topics, libertarian philosophy, realpolitik, western culture, history and the pursuit of truth from the perspective of a libertarian traditionalist.