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China heading for recession? [Copy link] 中文

Rank: 4

Post time 2008-11-22 15:59:06 |Display all floors
I've been monitoring some of the problems emerging in the Chinese economy including the widespread bankruptcies among smaller enterprises and decline in the property market and think this could be building towards China's growth ending some time next year and entering a contraction. China could be hit by some of the financial issues around the world but it has plenty of its own problems right now including the problems with the world economy hitting exporters in the country and the fact many Chinese companies were betting on global growth which seems to have been a bad bet. The companies building massive ports may be faced with bankruptcy.

I have a hard time believing China can maintain growth at this point with so much of the world economy falling and its own internal economic problems. There's likely to be some bank failures on the way with some having heavily lended to those sinking small enterprises and the lack of a deposit insurance system means a lot of people could lose their money. All the trends right now are down and unemployment looks to increase.

The data seems to indicate a recession is on the way for China. I saw on projection for the fourth quarter at 5.8% growth which is a huge step down from just the previous quarter. If that trend continues it could mean China enters a recession next year.

It's likely China will not suffer like the U.S. and other countries for a variety of reasons, but the likelihood of a recession in China seems to have increased considerably.

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Post time 2008-11-22 16:09:16 |Display all floors
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Rank: 4

Post time 2008-11-22 18:35:53 |Display all floors
Well, if you build a house of cards anywhere ......

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Rank: 8Rank: 8

Post time 2008-11-22 20:27:57 |Display all floors
Kodama,

Power generation is down 4% over last year. That's a very worrying sign. Growth of 5.8% means that there will be negative job growth.

Recessions for developing countries are hard to peg because increases in the economy don't always translate cleanly to other factors. For example, China needs 6% growth just to maintain employment.
"Justice prevails... evil justice."

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Post time 2008-11-22 20:59:43 |Display all floors
Steel production is down 17% too and I saw a report that 30% of China's steel mills have been closed. Not good.

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Rank: 8Rank: 8

Post time 2008-11-23 00:56:47 |Display all floors
Originally posted by zglobal at 11/22/2008 03:09 AM
Now they can return if need be and on the whole life is not so bad.


<Arched Eyebrow>  Considering the size of plots I saw for those folks still 'on the farm' it is going to be a shock to the village resources - including food supplies.  The CCP better step it up on rural land reforms - cause letting local governments plow under anymore viable, or semi-viable, farm land is not going be a good thing.

Then again, if the powers to be in Beijing are thinking of dabbling in hydroponics...
China's Eccentric 'Uncle Laowai' from Chicago, IL

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Post time 2008-11-23 04:18:40 |Display all floors
It seems that the rational for guessing that China will hit a recession is a regression type analysis.  You look back at the GDP trend and guess that it will continue its course.  The problem is graphs do not control GDP, industries do.  Just because China and the world has seen huge economic damage, it does not mean that it will continue.
To determine if China will hit a recession we need to look at the root of the problems.  In an oversimplified sentence, world consumer spending has dropped because credit is frozen.  Business can't expand, not being able to expand has cut consumption, a lack of consumption has cut manufacturing orders.  Not until the root of the liquidity problem is addressed will the world economy turn around.
The US has done a lot to fix some of its problems backing commercial paper, re-capitalizing banks, and soon to be large fiscal spending.  These things will help restore the US economy and, as the biggest player in the world economy, help restore the world economy.
But China is doing a lot to restore its own economy.  Since China is a production oriented economy, as opposed to service oriented, it is easy to help the Chinese economy by doing exactly what the Chinese government is doing, spending a crap-load of cash on capital developments.  It is estimated that the stimulus package proposed by China will result in 3% of China's GDP, Amazing.
So, if we add the three percent to the current 5.8 percent growth, then we have a growth rate that is inline with the past ten years.
Is this GDP growth sustainable, no.  No county in the world can grow this fast forever.  It will however, last a long time.  I am guessing the growth rate will slowly decelerate as China takes its position as the largest economy in the world.  

One last, semi-unrelated point.  A recession is two quarters of negative GDP growth.  For China to have a negative GDP growth, something drastic would need to happen.

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