Questioning China’s economic superpower status.

[DarK-LorD]

Questioning China’s economic superpower status.
Economic observers believe China is riding for a fall amid rising debts, illicit loans and increasing social unrest
By Tania Branigan / The Guardian, BEIJING

Illustration: Kevin Sheu

The wildest European optimists have painted China as Superman, poised to swoop in and save Europe, its biggest trading partner, from disaster. However, Patrick Chovanec, a professor at Tsinghua University’s School of Economics and Management in Beijing, compares the world’s second-largest economy to a less heroic cartoon character: Wile E. Coyote, Roadrunner’s archenemy.

“He’s running and running and goes off the cliff, and as long as he doesn’t look down, he’s fine. But when he does ... he drops,” Chovanec said.

Whether or not he is right — and other analysts are more optimistic — the comparison explains why Beijing is happy to see the European debt crisis dominate the G20 summit.

Chinese President Hu Jintao (胡錦&#28644 told reporters that he was following the crisis closely as he arrived in Europe on Tuesday, adding: “We are convinced that Europe has the wisdom and the competence to overcome the current difficulties.”

Yet even before Greece’s proposal of a referendum threw the bailout into doubt again, China was playing down its own potential role in any deal.

The eurozone bought 281.9 billion euros (US$388.4 billion) of Chinese exports last year. At the very least, China’s leaders must prevent European woes from turning a desired cooling of their domestic economy into a hard landing. A growing number of observers, like Chovanec, think a correction is due in any case because the country’s spectacular growth rate (10.3 percent last year) has masked equally spectacular problems: most obviously, a property bubble and frightening levels of local government debt and illicit loans.

It is not hard to see why China’s leaders worry. Even in the boom years, unrest has soared. Economic gripes can quickly play out on the streets: While European leaders gathered in Brussels to bash out a deal on Oct. 26, protesters threw rocks, blocked a highway and torched vehicles in an anti-tax riot in Zhili, Zhejiang Province​.

Some firms are already feeling the pinch from Europe’s troubles; last month’s growth in exports to the eurozone was less than half of August’s level. Usually, the Jiangbei Yichuan Electronics Co in Ningbo sells between 10 million and 20 million yuan (US$1.6 million and US$3.2 million) worth of blenders to Europe annually. However, this year, plummeting demand and pressure to lower prices mean it will sell perhaps 4 million yuan worth, Jiangbei Yichuan production manager Miss Xu said.

“The impact is obvious. After workers’ salaries and other costs, we are making almost nothing at all [on those sales],” she said.

In 2008, as exporters struggled, Beijing announced a 4 trillion yuan stimulus package that helped domestic growth recover quickly and spurred the first round of “China saves the world” headlines. This time, things are not so simple. Much of the stimulus came in the form of a credit binge; now the hangover has arrived.

Take the businesspeople of Wenzhou. Renowned for their entrepreneurial spirit, they turned to the murky underground market and its eye-watering interest rates when the government tightened official lending to stop the economy overheating.

Then wages and costs began to rise, and orders declined owing to the West’s new slowdown and an appreciating yuan. Unable to pay back loans, at least 80 bosses disappeared, declared bankruptcy or even killed themselves.

Some see Wenzhou as the canary in the coal mine; others, as an anomaly.

Gavekal-Dragonomics managing director Arthur Kroeber said there were serious problems in the Chinese economy, but “nothing to make me think it’s going to come crashing to a halt any time soon.”

The stack of bad debts can still be worked through, he believes. While the barely occupied “ghost cities” reveal high-end property bubbles in several places, there is an overall housing shortage. And a shock from Europe is unlikely to be as severe as 2008, he argued.

Growth slowed to 9.1 percent in the third quarter of this year and Standard Chartered has just projected a rate of 8.5 percent for 2012 to 2013.

However, if it slowed to 7 percent, “that wouldn’t be a disaster,” Kroeber added, particularly given that the number of people joining the workforce is falling.

“The fundamental question for the G20 is: Where is the growth going to come from?” Chovanec said. “People should be asking whether China could become the source of global growth and not just propping up a few sectors [through commodity purchases,] but bringing broad, consistent, consumer-led demand. So far, the answer is no.”

China is not Europe’s banker, he argued, but a shopkeeper extending credit to a customer to shore up its sales.

“Rather than selling more than it buys from Europe, accumulating reserves and lending them to Europe to keep it on life support, it would actually be better for China to take the euros and dollars and spend them on American or European products and productive investments,” he said.

Questioning China?s economic superpower status - Taipei Times

 

[epsilon]

Simple ... China has taken too much of drugs for consistent faster running. It has to take rest. But one thing sure soon or later china and india will get super power status.

 

[Audio]

Reviving threads older then 2 weeks is considered a no no on most discussion boards. just sayin'...

 

[Sergi]

Questioning China’s economic superpower status.
Economic observers believe China is riding for a fall amid rising debts, illicit loans and increasing social unrest
By Tania Branigan / The Guardian, BEIJING

Illustration: Kevin Sheu

The wildest European optimists have painted China as Superman, poised to swoop in and save Europe, its biggest trading partner, from disaster. However, Patrick Chovanec, a professor at Tsinghua University’s School of Economics and Management in Beijing, compares the world’s second-largest economy to a less heroic cartoon character: Wile E. Coyote, Roadrunner’s archenemy.

“He’s running and running and goes off the cliff, and as long as he doesn’t look down, he’s fine. But when he does ... he drops,” Chovanec said.

Whether or not he is right — and other analysts are more optimistic — the comparison explains why Beijing is happy to see the European debt crisis dominate the G20 summit.

Chinese President Hu Jintao (胡錦&#28644 told reporters that he was following the crisis closely as he arrived in Europe on Tuesday, adding: “We are convinced that Europe has the wisdom and the competence to overcome the current difficulties.”

Yet even before Greece’s proposal of a referendum threw the bailout into doubt again, China was playing down its own potential role in any deal.

The eurozone bought 281.9 billion euros (US$388.4 billion) of Chinese exports last year. At the very least, China’s leaders must prevent European woes from turning a desired cooling of their domestic economy into a hard landing. A growing number of observers, like Chovanec, think a correction is due in any case because the country’s spectacular growth rate (10.3 percent last year) has masked equally spectacular problems: most obviously, a property bubble and frightening levels of local government debt and illicit loans.

It is not hard to see why China’s leaders worry. Even in the boom years, unrest has soared. Economic gripes can quickly play out on the streets: While European leaders gathered in Brussels to bash out a deal on Oct. 26, protesters threw rocks, blocked a highway and torched vehicles in an anti-tax riot in Zhili, Zhejiang Province​.

Some firms are already feeling the pinch from Europe’s troubles; last month’s growth in exports to the eurozone was less than half of August’s level. Usually, the Jiangbei Yichuan Electronics Co in Ningbo sells between 10 million and 20 million yuan (US$1.6 million and US$3.2 million) worth of blenders to Europe annually. However, this year, plummeting demand and pressure to lower prices mean it will sell perhaps 4 million yuan worth, Jiangbei Yichuan production manager Miss Xu said.

“The impact is obvious. After workers’ salaries and other costs, we are making almost nothing at all [on those sales],” she said.

In 2008, as exporters struggled, Beijing announced a 4 trillion yuan stimulus package that helped domestic growth recover quickly and spurred the first round of “China saves the world” headlines. This time, things are not so simple. Much of the stimulus came in the form of a credit binge; now the hangover has arrived.

Take the businesspeople of Wenzhou. Renowned for their entrepreneurial spirit, they turned to the murky underground market and its eye-watering interest rates when the government tightened official lending to stop the economy overheating.

Then wages and costs began to rise, and orders declined owing to the West’s new slowdown and an appreciating yuan. Unable to pay back loans, at least 80 bosses disappeared, declared bankruptcy or even killed themselves.

Some see Wenzhou as the canary in the coal mine; others, as an anomaly.

Gavekal-Dragonomics managing director Arthur Kroeber said there were serious problems in the Chinese economy, but “nothing to make me think it’s going to come crashing to a halt any time soon.”

The stack of bad debts can still be worked through, he believes. While the barely occupied “ghost cities” reveal high-end property bubbles in several places, there is an overall housing shortage. And a shock from Europe is unlikely to be as severe as 2008, he argued.

Growth slowed to 9.1 percent in the third quarter of this year and Standard Chartered has just projected a rate of 8.5 percent for 2012 to 2013.

However, if it slowed to 7 percent, “that wouldn’t be a disaster,” Kroeber added, particularly given that the number of people joining the workforce is falling.

“The fundamental question for the G20 is: Where is the growth going to come from?” Chovanec said. “People should be asking whether China could become the source of global growth and not just propping up a few sectors [through commodity purchases,] but bringing broad, consistent, consumer-led demand. So far, the answer is no.”

China is not Europe’s banker, he argued, but a shopkeeper extending credit to a customer to shore up its sales.

“Rather than selling more than it buys from Europe, accumulating reserves and lending them to Europe to keep it on life support, it would actually be better for China to take the euros and dollars and spend them on American or European products and productive investments,” he said.

Questioning China?s economic superpower status - Taipei Times

Fall of Chinese economy will not be good for world economies too. Almost all economies are linked together. So it will bring down world economy

 

[epsilon]

I agree wit ur thought. China perhaps has slowened its economical growth rate in order to stabilize its own economy,whereas considering India it does not need to slow down as it is 5 years lagging to China's growth.