China is supposed to be the perfect large economy. Its GDP has been growing at 10%. Its huge export base is driven by cheap labor. Its rising middle class has become one of the world's largest groups of consumers.
Someone forgot to tell the Chinese government that a deep recession would eventually undermine its exports. The world does not need inexpensive goods when it does not need any goods at all. When Japan, the US, and EU all fall apart at once, whatever edge China has as a manufacturer evaporates.
The part of the economic problem in China that is harder to see is that a bad economy hurts its imports. That new middle class starts to break apart as workers are laid off. They stop consuming foreign goods, and, even worse, they stop consuming Chinese goods. The entire economy of the world's most populated country starts to spiral down.
According to The Wall Street Journal, "China's exports in December fell 2.8% from a year earlier to $111.16 billion, while its imports fell 21.3% to $72.18 billion, the General Administration of Customs said Tuesday."
The Chinese economic miracle is broken and it cannot be fixed while the world economy is in trouble. China believed its export base made it "too big to fail." It has not worked out that way.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
1-13-2009 @ 9:47AM
Virgil Bierschwale said...
Have ya'll ever actually reviewed all of these numbers down to the details?
Take a look at the services portion of the 1008 GDP numbers, paying particular attention to the bottom chart on this link http://keepamericaatwork.com/top_5_gdp.html
Today, BEA released the 1108 numbers and you can find an analysis of mine that I will be using in the book that I am writing because I'm finding out that the financial media only covers the summary lines and its becoming more and more obvious to me that they havent spent anytime doing their due diligence at all.
Two other short articles I wrote today can be found at http://keepamericaatwork.com/?p=765 and at http://keepamericaatwork.com/?p=770
I am in the process of reviewing the Product portion of the GDP and I will post my analysis at http://www.KeepAmericaAtWork.com once it is completed.
Thanks,
Virgil
1-13-2009 @ 10:51AM
Polly Chick said...
This is a race to the "industrial bottom" by the USA...for what? Prevent military confrontation by engagement in commerce. Implement buy cheap and sell dear form of mercantilism. Expand markets through exports... all reasonable arguments. BUT NOT IN OUR INTEREST! There has been more military instability, more unemployment and declining markets for us as we find our technology expropriated. The nefarious creation of "financial instruments" pales in comparison to the decimation of our real productive capacity. No wonder public confidence has eroded and placed capitalism under seige. We have disregarded the value of employment (especially for those of low ability) and fallen for the hollow promise of 'globalization".