Storm Clouds on the Horizon in China?
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  • Jacksonian Libertarian

    Why is it too soon? Isn’t China’s export model economy dependent on the importing economies ability to buy? Does it look like the US and European economies are suddenly going to BOOM and want more Chinese junk? Isn’t China’s flat energy consumption more likely to mean that growth in production and supplies has ended, that the 8% growth number is all lies, and that China isn’t growing at all? Isn’t China more likely to raise interest rates and go into recession to fight the inflation?

    China is no longer forcing its banks to send their entire dollar deposits to the central bank; this means that China is no longer be manipulating their currency against the Dollar. China’s exporting businesses will no longer enjoy a price advantage as they have for decades, and massive dislocation in the Chinese economy will now ensue as its economy is exposed to highly increased competition (the inefficient state owned businesses will suffer the greatest losses). Since nothing the Chinese produce can’t be produced as well in some other country, and the loss of the price advantage due to currency manipulation, the lower cost labor in other countries is going to take market share from China in short order.

    China is hitting the wall NOW, and it isn’t going to be a gentle crash. With the massive corruption common to Authoritarian governments, lack of legitimacy conferred by Democracy, injustice from the lack of the Rule of Law, pent up cultural aspirations from decades of exposure to the bleeding edge American Culture, and the dashed hopes and dreams of a newly elevated middle class numbering in the 100’s of millions; this will be a Perfect Storm of a crash. It is going to be incredibly bloody, Boxer Rebellion bloody, Cultural Revolution bloody, bloody like the Chinese can do bloody.

  • I’ve just finished reading Country Driving and Factory Girls, two great books by Mandarin speaking American reporters about what its like on the ground in the Chinese boom towns. I can’t recommend them highly enough if only to put a human face on what is happening in China. The stars of the story are millions of 15-to-25 year old Chinese girls who work 70 and 80 hour weeks for considerably less than a dollar an hour. They live in the factories themselves, 6 to 12 to a room, and spend maybe a third of their wages on Western style clothes (high heels are big) and cell phones. The rest they send back to their older parents and younger siblings who live in the interior of the country on one acre farms. Most of these girls have a Jr. High School education and they exhibit tremendous spunk and determination. Here is a job interview:

    http://tinyurl.com/74ysdts

    The best-selling self-help book in China, Circles and Squares, turns Horatio Alger on his head:

    http://tinyurl.com/7pbtnkr

    http://tinyurl.com/7enardg

    Corruption was pervasive, that goes without saying, but what surprised me was the incompetence and short-term thinking that seemed to rule even among (especially among) the most successful. There was a fly-by-night quality to everything, and the nouveau riche lived like there was no tomorrow. The buildings in particular — factories, apartments, malls, anything made out of steel and concrete — were shoddy in construction, with corners cut and the financing shaky.

    If there is a slow-down in China a lot of people are going to lose their money — the ones wearing Prada and driving fancy cars which the Western press style as China’s “new middle-class.” God knows how the Politburo will handle it.

    The girls themselves will be fine. They will go back home. They can survive anything.

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