If China Is Recovering, How Will We Fare? 38 comments
-
Font Size:
-
Print
- TweetThis
Premier Wen Jiabao’s credit plan or bailout has possibly started to kick in for the world's third-largest economy, China. The prices of commodities such as copper and zinc are breaking out. The increasing demand for commodities and products from around the world should be an impetus for growth. Is this just a natural cycle or could Premier Wen Jiabao’s 4 trillion yuan or $585 USD billion stimulus package be the savior of the global recession?
Although first-quarter GDP grew 6.1 percent-- the slowest growth in almost a decade-- there was growth. However Chinese exports have continued to fall by the wayside. As the stimulus plan has started to produce results, there is still industrial overcapacity, increased unemployment and weak private investment sentiment.
China needs its economy to pick up almost more than the United States does. The fallout of exports has caused thousands of factories to close and the jobs of millions of workers to be lost. This could increase the risk of social unrest in China. China needs its planned 8 percent economic growth for the year to put millions of workers back to work.
Putting things into perspective, China got its stimulus plan started months ahead of the United States. China has much more reserves than the US. More importantly it is interesting to compare the $585 Billion to the trillions the US has tried to so far no effect.
If China digs itself out of its current recession, does that mean the United States will as well? The old question pf decoupling or coupling. China’s potential rebound contrasts with severe recessions felt around the world. The OECD (Organization for Economic Cooperation and Development) predicts 6.3 % growth for China this year (versus their hope of 8%). That's compared to a 4 % contraction in the United States. and a 6.6 % decline in Japan.
Car companies in China are not threatening bankruptcy and building has started to pick up once again. Nissan Motor (NSANY) reported sales of passenger cars in China rose 36 percent in March from a year earlier. Dominoes can fall both ways. It seems that confidence is contagious and consumers are spending.
Another example is Anhui Conch Cement Co. (AHCHF.PK), China’s biggest maker of the building material. Anhui Conch Cement reported that sales volume jumped 15 percent in the first quarter from a year earlier. Another positive sign on the real estate front.
Another example is the Chinese Stock market. Stocks have climbed 39 percent this year. This is a much larger percentage move than in the States. So far we are not anywhere close to hearing these great tidings out of the States.
Time will tell if the Chinese bailout has worked and if they have turned the corner. It will be more interesting to see how this could effect the rest of the world.
What do you think?
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
TraderMark
-
2
Don Dion
-
3
Cliff Wachtel
-
4
Mike Havrilla
-
5
James Quinn
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 38 comments:
If China boosts comodity inflaiton, so be it, Uncle Ben will throw more money into it and push it higher. It will hurt the US economy, but don't forget it will hurt China's too, maybe at a even worse degree. Therefore, if China has inflation too, it will tighten its monetary policy and reduce commodity demands too.
Who will be the first to fall in an inflationary environment? I think Uncle Ben firmly believes that wouldn't be the US.
* Chinese consumers have VERY little household debt (even many HOUSES are paid for in cash)
* Chinese households save about 30% of their income
* The Chinese government does not have the unfunded liabilities of Social Security & Medicare (that total about $70 trillion)
* Chinese banks didn't foolishly invest money on instruments that they did not comprehend
In sum, the Chinese economy is much more free from debt and regulation than is America's. Of course it will grow more quickly.
The choices for the new president are simple. It’s either recovery or depression. Fix the banks, trade with China and energy policy or preside over American decline and the eclipse of American leadership at the hands of China
To restore the wealth lost in the current financial crisis, the Treasury would have to monetize some $30 trillion of toxic assets, almost ten times what the Geithner Treasury is currently contemplating, and twice the size of current US annual GDP. Add to that about $10 trillion of value lost in the collapse of commodity prices and another $10 trillion in real property values, and we have a wealth loss of $50 trillion."
(Obama’s Politics of Change and US Policy on China, asia Times, Henry Liu)
China will emerge as one of the new world Superpowers. They have control of the US via debt they own.
I can't wait for them buy their own stuff and find out how crappy it is.
If you noticed that the Taiwan stock market is still climbing for weeks now, yet US market is still depress, northern and easter Europe is not growing, then where do they sell their wares?
China. Again, China government subsidize large portion of the sales of LCD TV to Chinese rural area in February, one Taiwanese company who benefit on this is Chi Mei (anti-communist and a pro-DPP supporter).
In March, it was cell phone and other consumer products that is being subsidize, with billions of dollar to spend, the export industry may be down, but the local industries are up.
>
> What are we going to sell them? Salmonella laced peanuts?
On Apr 17 03:10 PM Larry House wrote:
> Fortunately our only investment opportunities are not just in the
> US. I love my country, but it is not the best investment on the globe--right
> now. I am investing in China (and Asia) for long-term growth. You
> take it where you can find it.
> Unfortunately this is one of the reasons the USA is in the state
> that it is today. Some people are just not investing in America as
> much any more. If you loved your Country, you would invest in her,
> not elsewhere. Investing elsewhere will only help destroy her.<br/>
No, the USA is driving out investment because (a) its federal government is borrowing and spending too much, (b) its currency's value keeps dropping, and (c) its citizens prefer to buy consumer junk instead of saving. I love America (though I consider myself a Hoosier 1st, American 2d) and will willingly criticize the political and banking classes for burdening her economy. I will not, however, suffer the opportunity cost of not investing overseas because of the idiocy of the political and banking classes...until they slap capital controls on me for "patriotic" reasons, of course.
Anyway, if you think it is so bloody wonderful. Suck it and see. But remember much of the US doesn't have enough water to convert it all to paddy fields.
On Apr 17 10:31 AM User 143167 wrote:
> This is a "pick your poison" competition, but just underestimated
> Uncle Ben. He knows better than anyone on the earth that the name
> of the solution to the crisis is "Inflation". So don't expect he
> will tighten monetary policy any time before the economy booming
> again.
> If China boosts comodity inflaiton, so be it, Uncle Ben will throw
> more money into it and push it higher. It will hurt the US economy,
> but don't forget it will hurt China's too, maybe at a even worse
> degree. Therefore, if China has inflation too, it will tighten its
> monetary policy and reduce commodity demands too.
> Who will be the first to fall in an inflationary environment? I think
> Uncle Ben firmly believes that wouldn't be the US.
On Apr 17 08:17 PM User 357469 wrote:
> Unfortunately this is one of the reasons the USA is in the state
> that it is today. Some people are just not investing in America as
> much any more. If you loved your Country, you would invest in her,
> not elsewhere. Investing elsewhere will only help destroy her.<br/>
>
> On Apr 17 03:10 PM Larry House wrote:
No need - the Chinese public speculated on housing for them. There's a huge overhang of empty urban housing. & for good measure, their credit control on corporate lending reputedly wasn't up to much - even before the government told them to start throwing money at corporates a few months back.
I found this article very interesting. I will attempt to answer the implied question: I do not believe our economny will ever return. A look at world economic history suggests that we are in the process of losing the economic high ground to China and our economy is not likely to improve any more than England’s' economy improved 250 years ago when they lost the high ground to us or Spain’s' economy 250 years before that when they lost the high ground to England.
I believe that in 2-4 years the US economy will look like Mexico's and Mexico's will look like central Africa.
Can't happen here? The three previously mentioned world economic transitions were caused by the same two conditions: The losing country had accumulated more debt than their economy could support and the losing country had such incredible hubris they were unable to see it. The debt funded spending spree is over and we're going to pay the price!
Before the 21st century closes, China will have played their cards for long-term gains which will put them in position to replace the USA as the dominate economic, political, and military power.
While I think your conclusions are spot on, your historical time line is off. The real tranistion date from England to US Dominance was during the crisis of the 1870s. At that time the real under pinings of the US economy was the railroad expansion and over speculation. Much like the tech bubble in 2001. The US had little debt while the English had a bunch. To understand our current situation read about the 1870s but substitute the names.
On Apr 18 11:26 AM Bjarne Jensen wrote:
>
> I found this article very interesting. I will attempt to answer the
> implied question: I do not believe our economny will ever return.
> A look at world economic history suggests that we are in the process
> of losing the economic high ground to China and our economy is not
> likely to improve any more than England’s' economy improved 250 years
> ago when they lost the high ground to us or Spain’s' economy 250
> years before that when they lost the high ground to England.
>
> I believe that in 2-4 years the US economy will look like Mexico's
> and Mexico's will look like central Africa.
>
> Can't happen here? The three previously mentioned world economic
> transitions were caused by the same two conditions: The losing country
> had accumulated more debt than their economy could support and the
> losing country had such incredible hubris they were unable to see
> it. The debt funded spending spree is over and we're going to pay
> the price!
Also please tell me in what areas does the US lead the world anymore? In the amount of debt? In the amount of crooked bankers and politicians?
On Apr 17 08:17 PM User 357469 wrote:
> Unfortunately this is one of the reasons the USA is in the state
> that it is today. Some people are just not investing in America as
> much any more. If you loved your Country, you would invest in her,
> not elsewhere. Investing elsewhere will only help destroy her.<br/>
>
Why don't we all face the music instead of dodging the ISSUE. Let's stop saying 'we should...we should...we should'.
It's all irrelevant. The US has gotten too large and too fractious to be governable under democracy. Once Obama has done his best to reverse as much of the Bush (and to some extent Clinton) years, then it will be a slow drift downwards. Every man for himself.
The US won't fail....after all, it's 2B2F (too big to fail). However, it's clear IT WON'T SUCCEED. Sad, really.
I think the recovery is clawing its way ahead in China. One effect it ought to have on the rest of the world, if it succeeds, is to prove once and for all that China is serious about becoming an economic power.
But no matter. If you’re like me and like strong balance sheets and enthusiastic workers, then you sell the US and buy China.
Moreover, as sad as it is to say it, you must buy the nation that is moving more toward freedom and sell the one that is moving more away from it.
For if you’re even a tiny bit objective and rational when you think of Obama, Geithner, Pelosi, Frank, Boxer, Reid, Dingell, Kucinich, Waxman, Rangle, Schumer, Dodd, Murtha, and Emanuel running your nation, and you’re an investor, you must be at least a little leery of that nation’s prospects.
Long CEO; HNP; YZC; SOHU; NTES; CHL; PTR; KHD; PWRD.
Thank you for the article, AA.
"The US has gotten too large and too fractious to be governable under democracy."
I love it!
Politicians will do anything to create the perception that they are "doing something" about the crisis of the day.
Politicians are much more concerned about the next election than the long term economic health of the nation. This is, and, has been the fundamental problem for a very long time.
On Apr 18 04:53 PM coreopsis wrote:
> Daltorio: US is still leading producer of (i) aircraft of all kinds;
> (ii) entertainment products (esp music/film), and (iii) armaments.
>
>
> Why don't we all face the music instead of dodging the ISSUE. Let's
> stop saying 'we should...we should...we should'.
>
> It's all irrelevant. The US has gotten too large and too fractious
> to be governable under democracy. Once Obama has done his best to
> reverse as much of the Bush (and to some extent Clinton) years, then
> it will be a slow drift downwards. Every man for himself.
>
> The US won't fail....after all, it's 2B2F (too big to fail). However,
> it's clear IT WON'T SUCCEED. Sad, really.
Things would be much worse than they are now without having backed some of these awful (and i agree in the use of that word) us companies.
This a global depression, and China's going down the toilet like the rest of us.
And as for China becoming the next world super power, well believe what fairy tales you like, the EU is more likely to take that seat.
On Apr 22 12:22 PM Mombasa wrote:
> You obviously have no idea how the European Union works, it's a new
> type of empire of a type never seen before in history, it doesn't
> even need strong GDP growth, lol the EU will just add another country
> or 2 and keep expanding... Ukraine and Turkey to name but a few,
> sometime in the near future... lol.
Sticking dogmatically to a failed postion is not prudent, I am prudent.
China is far too poor, too technologically backward and too inward-looking to be a credible economic leader and its social arrangements are hardly a model for the democratic world.
Europe is a model for a new world order, you don't need to be a rocket scientist to work that out, unless of course you believe what you want to believe.
If we rebuild America, we will be able to buy American.
Double digit increases every month.
What are we going to sell them? Salmonella laced peanuts?
They redeem, printing goes overboard, USD drops, they are screwed.
China is going the Internal route, they want their people to buy Chinese goods made in China.
As long as the Chinese continue to buy our Treasuries and the EU procrastinates, the USD will remain Comparatively Strong.
Monetary Policy will continue to remain loose until next year at the earliest. Bernanke and company made it quite Clear: The Economy must be on strong footing before any tightening occurs.
Yields on Treasurys will start to and continue to rise before any tightening measures will even be contemplated. A Stronger Economy will mean a stronger USD, not a weaker one.
As far as higher commodity prices before the USA recovers, that's a gimme. Blame Obama for tying the Stimulus package to the 2010 elections instead of starting the Infrastructure Build in 2009.