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China's economic enigma

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  • #31
    Re: China's economic enigma

    A glut of cash is producing bubbles in the Chinese economy. The racing credit growth and the low costs for wholesale financing are leading to financing abuses and production surpluses in the real economy. Even lower than usual interest rates have residents transferring their asset preference from bank deposits to the capital market, promoting frothy asset prices.

    Increasing real estate prices comprise the main bubble, but without high land prices, local governments cannot come up with the cash needed to fund the economic stimulus package. So, the central government allows the bubbles to inflate.

    On July 16, the National Bureau of Statistics released second quarter and first half figures for the year, according to which real GDP in the second quarter grew 7.9%, 1.8 percentage points higher than in the first quarter, and in the first half by 7.1%, year on year.

    Many analysts see China’s economy rebounding strongly, but the figures from the real economy do not support this judgment. In the first five months of this year, the profit of industrial enterprises above designated scale totaled only 850.2 billion yuan, down 22.9%, year on year. Of that total, state-owned and state-controlled enterprise profits totaled only 246.7 billion yuan, off 41.5%. During the same period, value-added of nationwide industrial enterprises above designated scale grew only 6.3% year on year, while the growth in the same period last year was 16.3%.

    Rapid GDP growth is still being boosted by fixed asset investment promoted by the loose credit policy. In the first half of 2009, fixed asset investment grew 33.5%, year on year, in urban areas by 33.6%. In railway and transportation, road transportation, and water facilities, environment, and public facilities management, fixed asset investment grew 126.5%, 54.7%, and 54.5%, respectively.


    • #32
      Re: China's economic enigma

      Originally posted by FRED View Post
      Thank you for the Chinese Car Bubble report. Looks like a spin-off of the Anglo Saxon Credit Bubble with Chinese Characteristics.

      A bubble without government is like a car without gasoline: it's not going anywhere!

      ya, but how long did the anglo-saxon auto bubble lasted?