Tom Lindmark

Death of the Asian Development Model: Exporters Chasing a Failing Strategy?

You make some interesting points. I don't think that stimulus is bad for China but there are indications that a lot of it may be just recycled into the equity markets. I'm not sure that they will be able to ramp up domestic demand to the extent they may need to in order to plug the hole in their future exports. At any rate it's going to be interesting to watch.


On Apr 27 10:20 PM M.R. Henderson wrote:

> If he is wrong, and now jobs are created, while consumption levels
> return in a year to levels that allow factories to turn a profit
> running under capacity, and as just happened (largely unreported)
> the government quietly pays off the bad loans of its banks allowing
> them to continue with little adverse affect, then China will have
> in place a more efficient infrastructure with which to develop the
> internal economy that it also knows is strategically necessary in
> the case of a war. Most of China's stimulus projects have been on
> the books for years. They are being accelerated, with 1/3 of the
> stimulus leaking, which arguably isn't that bad a thing right now
> in the face of declining domestic demand for goods and property.
> We call this corruption, Keynes would call it demand. It doesn't
> really matter where it comes from, if it takes cars off the lot and
> liquefies overbuilt apartments. And that's not even considering
> the deflationary effects of increased savings amidst over capacity.
> So this first salvo of stimulus is not necessarily a mistake for
> China.
>
> But if demand from the world for China's goods does not come back
> to a certain level, if as Soros and others suspect, we are at a paradigm
> shift, and savings rates around the world increase, then China will
> need to rapidly increase long term employment, possibly through health
> and other public safety initiatives to help control things at a simmer
> for awhile. However, the Chinese consumer, fed by Hollywood, may
> need little stimulus to increasingly recycle its earnings, the Chinese
> multi-child boomers (1970-1981) are now coming into peak profit earning
> age. They do not save like their parents, indeed they spend their
> parents savings.