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  • China, Locomotive of the world economy ? Or, still the US ? 0 comments
    Jun 5, 2009 3:03 PM

    China, Locomotive of the world economy ?  Or, still the US ?

     Now, the world No.3 GDP, right behind Japan 1/3 of the US GDP. Last year 2008, the car sales in China surpassed symbolic 10 million mark overtook the No.1 spot in the world, first time replaced the US car sales that temporalily set back this time around to just under 10 million mark.

     In the midst of severe worldwide recession since last year and despite worldwide sales to export dropping in half on all products,China's economy climed to theNo.3 GDP in the world and still continues to grow 20% annual rate at this size of economy.  It still may go long way to slow down and may potentially takeover the No.1 spot replacing the US.

     With economic stimulus, China still keeps the economy going by turning the excess production into own consumption or the government buying up as you see now. Watch out !  Government buying...  Check your intuit and instinct !  It is maybe Zombie economy, careful !  It is fundamentaly the semi-free economy under the Communist control. Politics comes in anytime with much higher degree of interferance illo... far higher degree than the US government excercising the overwhelming power as you see now in the US. Be Prepaired !

     Meantime, Can China alone be prosper in the midst of worldwide recession and intertwined international web of trade network ?  No countries can be self-sufficient in the modern life style with full of modern convenience economic world,period !  Look at oil supply alone is enough to prove it. Protectionist or self-isolationism compounded with trade wars in the past proved it self-destructions. The US has experienced but the rest of the world virtually have no experience. So, the US has been straneously preaching the world " Free Trade ".

     China and other communist bloc countries had been economically self-sufficient in agricultural economy and far behind economic and technology developments. Now,those countries with untapped, undeveloped markets and virtually no inflation over 50 years under communist controled economy have joined the free world economy. The impact has been significant.

     Economic world orders have been changing with once in a life time opportunity !  Look around yourself how things are changing in rapid pace. You are eye-witnessing the changing world in the history. In changing economic and political environments, " the Fittest Survival " is natural law including human species. The US must fit to survive and thrive under these changing environments.

     So, China alone can not prosper without the rest of the world. It will hit the wall. Let's explore how they will hit the wall rather than why the reasonings. China has about 1.2 Billion peoples 3~4 times of the US populations. The key is its compositions of demoraphies that consists of  the old catholic type large family of 10~15 people households and the new 1-child policy young family households.

     This fundamental differences can not be ignored or overlooked by their standard of livings and purchasing powers in extremity, never seen anywhere in the world or in the history. And they are first time buyers of everything modern conveniences. Particularly, among those young 1-child families after fillings of basic needs, the car purchases became top priorities or desires. By obtaining credits anyway to purchase such high ticket items, the car sales in China surpassed the US for the first time,however due to the US car sales plunge so far. With their continued growing economy, is it sustainable or continue to grow further beyond 10 million or more car annual sales pace despite in the midst of worldwide recession ?  Here is the catch. Remind you that they are first time buyers which means the market will suturate and becomes soon replacement cycle market just like any other developed markets ! When the market saturate, the explosive market expansion usually come to end.

     So is other products of modern conveniences. In particular, over production of raw materials such as steels,alminums are purchased by the government and stock piled. What are they going to do with it, running out of spaces ?  Since it is more than domestic needs, where are they going to dump them ?  Sure thing, it's going to dump in the world market with give away prices. If so, how long can they afford to continue to dump them before running out of their money ?  It will just be disturbing the world market and hit the wall.

     On the other hand, Chinese products are generally the cheapest in the world. If so, do you think that chinese consumers or companies will buy enough quantities  the same products with the higher priced world products ?  If they don't or can't buy enough quantities or amount of the world products, how can they pull the world economy ?

     Japan or Germany with 1/3 or less GDP of the US are not big enough to buy the world products of all kinds. The conclusion : There will be no replacement for the US to be the locomotive of the world economy in foreseeable future !

     So, Who is the buyers of the world products of all kinds ?  73% of the US economy is consumer driven ; The consumers --- individual  Americans with credits !  As long as majority of individual American consumers have problems with any reason of " don't want or can't buy or not now whatever the reasons not to buy the world products, not only American economy nor the whole world economy goes nowhere !

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