Sunday, March 07, 2010

Entering the Greatest Depression in History: China (English)


2009-08-06

In November of 2008, the Chinese government injected an “$$$849 billion stimulus package aimed at keeping the emerging economic superpower growing.”... China then recorded a rebound in the growth rate of the economy, and underwent a stock market boom. However, as the Wall Street Journal pointed out in July of 2009, “Its growth is now fueled by cheap debt rather than corporate profits and retained earnings, and this shift in the medium term threatens to undermine China’s economic decoupling from the global slump.” Further, “overseas money has been piling into China, inflating foreign exchange reserves and domestic liquidity. So perhaps it is not surprising that outstanding bank loans have doubled in the last few years, or that there is much talk of a shadow banking system. Then there is China’s reputation for building overcapacity in its industrial sector, a notoriety it won even before the crash in global demand. This showed a disregard for returns that is always a tell-tale sign of cheap money.”

China’s economy primarily relies upon the United States as a consumption market for its cheap products. However, “The slowdown in U.S. consumption amid a credit crunch has exposed the weaknesses in this export-led financing model. So now China is turning instead to cheap debt for funding, a shift suggested by this year’s 35% or so rise in bank loans.”

In August of 2009, it was reported that China is experiencing a “stimulus-fueled stock market boom.” However, this has caused many leaders to “worry that too much of the $$$1-trillion lending binge by state banks that paid for China's nascent revival was diverted into stocks and real estate, raising the danger of a boom and bust cycle and higher inflation less than two years after an earlier stock market bubble burst.”

http://www.globalresearch.ca/index.php?context=va&aid=14680

See also Entering the Greatest Depression in History: The Bailout Bubble
See also Entering the Greatest Depression in History: BIS - Bank for International Settlements
See also Entering the Greatest Depression in History: An Oil Bubble
See also Entering the Greatest Depression in History: China

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