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The Gloom in China’s Glowing Economic Stats
Daniel Fisher, Forbes
A curious article appeared in People’s Daily, China’s state-owned newspaper, a few weeks ago. It detailed how citizens were ridiculing a government statistic suggesting wages had risen an improbable 13%. According to the paper, the new sarcastic catch-phrase circulating on the Internet is “I’ve been given a raise.”
China bulls beware: When the mouthpiece of the Communist Party of China questions the country’s economic statistics, investors should take cover.
Officially, China is firing on all cylinders. The China National Bureau of Statistics reported gross domestic product increased 7.1% in the first half of 2009 over year-earlier levels, down only slightly from the 9% growth rate for all last year. Sales of textiles, cement, soft drinks, tractors and automobiles grew at double-digit rates. The Shanghai stock market is up 86% since January.
But behind those numbers is an unprecedented expansion of the country’s money supply. The government has poured $586 billion into a stimulus program it started this year to combat the world financial crisis. Banks have issued new business loans at four times the rate of last year. If that spending stops–and there are hints that the government is trying to put on the brakes–China’s economic growth rate will stall. It might fall all the way to zero, says Albert Edwards, global strategist at France’s Société Générale.
(19 August 2009)
Walker’s World: The China bubble
Martin Walker, UPI Asia
Any assessment of China’s economic prospects has to begin with the fact that the Beijing political authorities may be the world’s best-governing elite in terms of their economic record. But they may be running into trouble.
They have proven themselves over the last 30 years to be extraordinarily accomplished, delivering sustained economic growth and higher living standards. The country is now poised to overtake Germany as the world’s leading exporter and to overtake Japan as the world’s second-largest economy.
…The question is whether this model can comfortably continue when its main export markets in North America and Europe have sharply reduced their appetites for Chinese imports.
The other severe challenges for the Beijing authorities are well-known: the shortage of arable land; the even worse shortages of water; the growing dependence on imported energy; an environmental crisis so severe that it has become a major health problem; and the demographic nightmare that will soon result from 30 years of the one-child policy…
(18 August 2009)
China’s wild west
Martine Bulard, Le monde diplomatique
My journey to China’s westernmost province began this May in the backroom of an ordinary brasserie in one of Paris’s eastern suburbs. The Uyghur man I had come to see was accompanied by a plainclothes policeman, but even so, his hands trembled and there was a look of fear in his eyes: had I really come to interview him or was I in the pay of the Chinese political police? He was a member of the dissident World Uyghur Congress (1) and had just been granted political asylum in France. His was a run-of-the-mill story: he had protested about an injustice at his workplace in Xinjiang, which led to him being arrested and imprisoned. After that he had fled. That was all he would say. His fear of being tracked to a Paris suburb may seem excessive but it’s indicative of the moral and physical pressure facing the Uyghurs, China’s Turkic-speaking Muslims.
A few days later, I arrived in Urumqi, the capital of the vast Xinjiang Uyghur Autonomous Region of China, which is nearly 4,000km from Beijing. There were no immediate signs of tension, even in the city’s Uyghur district. Here, members of the region’s Muslim minorities – Uzbeks, Kazakhs and Kirghiz – coexist with Han Chinese, who are the largest group in the city (though not throughout the Xinjiang region) as they are in China as a whole. Some Han families have lived here for several generations.
…Between 5 and 8 July, there was an unprecedented outbreak of violence in this and neighbouring districts of Urumqi, in particular outside the University of Xinjiang. For several hours on the 5th, Uyghur demonstrators armed with clubs, knives and other makeshift weapons set fire to buses, taxis and police vehicles. They looted shops and beat and lynched Han Chinese. The next day, the Han hit back, attacking and killing Uyghurs. By the end of July, the official statistics registered 194 dead and 1,684 wounded, but the figures are not broken down by ethnic group.
…Xinjiang’s economy is based on raw materials, agriculture and, to a lesser extent, tourism, and a good half of the engines of economic growth are in the hands of the XPCC or bingtuans. Comprehending this state within a state is essential to any understanding of this far-flung province of China…
China pushing yuan as global currency
Hari Sud, UPI Asis
China and the United States held talks on strategic and economic matters in Washington on July 27 and 28, which both sides declared a success. However, such talks are pointless unless the basic issues of balanced trade and the value of the Chinese yuan are on the agenda.
Now might be a good time for China to push its currency, the yuan, as a global currency. It has US$2 trillion in reserves in the United States, making the powerful nation its debtor. It also has a list of other debtors that includes Europe. China holds all the cards to be a powerful global power.
The United States and Europe have dug their own graves with their financial excesses, an emphasis on globalization and an unnecessary war in Iraq. If it pushed hard, China could make the yuan the gobal currency.
…The next two years will be a period of “rest and recovery” for the United States and other world economies. Although China has suffered on the export front, its economy is still humming at the rate of 6-7 percent annually. It has put its unemployed to work with its own version of a stimulus package, and surplus goods that could not be exported have been diverted for local consumption.
Since the end of World War II the West has been arrogant and overconfident. Western countries have ignored talk of reducing the role of the dollar and giving a greater role to the yuan or any other currency. But with almost all Anglo-Saxon economies in bad shape, they may have no choice.
(7 August 2009)