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The Forum > General Discussion > China's looming recession

China's looming recession

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With China's stock market tumbling, falling company profits, and stimulus failing to work as before, it looks as though China's rapid growth is shuddering to a halt. Given China's huge internal debt, there is every chance that this lack of growth will become a recession and that this could have as big an impact as the GFC.

From the Washington post:

"Indeed, while it might not have gotten as much attention, Chinaís benchmark stock index was, with its 25 percent drop, the worldís worst-performing in 2018. Part of this was because of the fear that President Trumpís nascent trade war might turn into something even more serious, but only a part. More significant than what Washington was doing, you see, was what Beijing was. Thatís because, in what has seemingly become an every-other-year tradition in recent years, Chinaís government has stepped on the economic brakes pretty hard in an attempt to put an end to what looks like some bubbly behavior.

In the depths of the GFC, Beijing unleashed a stimulus the likes of which the world hadnít seen since World War II. It amounted to some 19 percent of its gross domestic product. By comparison, Obamaís stimulus was only about 6% of GDP. Aside from its size, what made Chinaís stimulus unique was the way it was administered. The central government didnít borrow a lot of money itself to use on infrastructure, but rather pushed local governments and state-owned companies to do so. The result was a web of debt thatís been even harder to clean up than it might have been because of all the money that unregulated lenders ó so-called shadow banks ó were frantically handing out above and beyond what Beijing had been hoping for."

The fears in Beijing have always been that the acceptance of the Authoritarian Communist government has been due to the continual increase in living standards could evaporate in the event of a recession and lead to internal instability which in turn could lead to more belligerent Chinese stance to divert attention.

Comments are welcome..
Posted by Shadow Minister, Thursday, 10 January 2019 9:21:12 AM
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Who knows? There is a lot of fake news about everything these days. The MSM is not to be trusted. I do think, however, that Australia is relying to heavily on China and its Communist, pseudo free market attempts.
Posted by ttbn, Friday, 11 January 2019 10:18:58 AM
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Shadow Minister agree
Our biggest trading partner is our biggest threat too
Japan bombed Pearl Harbor because they thought they had no other choice
We must keep our eyes open and minds clear in relation to both that country's economy and its intentions
Posted by Belly, Friday, 11 January 2019 10:58:08 AM
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I was suspected the trade war would be worse for China. The US should be more self sufficient of China. It will affect Australian raw materials but maybe it'll encourage us to develop a more sustainable economy.
Posted by Canem Malum, Saturday, 12 January 2019 12:46:08 AM
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SM we will look and talk about this much much more
Our eyes seem to be on other things, but Ostriches too do that
China is making hay while the sun shines, but a day of confrontation will come
Posted by Belly, Saturday, 12 January 2019 4:19:34 AM
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A recession seems a bit hyperbolic given that they've been growing at double digit rates for 2 decades and are still up around 5% annual GDP rates.

Nonetheless, things aren't good for them and it doesn't look promising for China or the surrounding regions.

The Chinese have made an unspoken agreement with their government over the past 30 years - we'll surrender our freedoms so long as you (the government) provide us with economic growth. If the government breaks the agreement all hell breaks loose. And they know it. So they'll try to keep all the balls in the air and hope something comes along to salvage them from their own problems.

In the meantime, the government is trying to distract with things like increasing the war-like stance against Taiwan.

And in the middle of all this comes DJT. The trade war is a massive problem for China and they will ultimately cave in to Trump's demands. They have little choice. China has been able to grow at these rates so long as the US remained its patsy. That's all over (at least until another Democrat gets in the White House) and Xi needs to re-calibrate to the new circumstances. Its unpalatable but inevitable.

Longer term, China has a demographic problem. As Steyn said years ago, they'll get old before they get rich. And the average age in China is climbing rapidly. The one-child policy has been rescinded but Chinese families are still having just one (normally a boy) and, short of forcing women get pregnant, there's little the government can do to fix that mess.

All those who predicted the Chinese century are going to find a way to pretend they didn't.
Posted by mhaze, Saturday, 12 January 2019 11:51:52 AM
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Yes China has a big problem. See my new post, they are cutting or eliminating subsidies in wind & solar power generation, & on electric cars, among other economies.

Expect some of the more enlightened countries around the world, well at least those less corrupted to follow the lead of china & or Trump.

Not here of course, if Labor do win. They will have so many they have to pay off with subsidies & contracts, that we will be trillions poorer from their corruption before many people actually do wake up.
Posted by Hasbeen, Saturday, 12 January 2019 1:04:17 PM
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We never gave this thread is deserved interest
Yes China has used its money like confetti.
And yes it is heading for very real trouble
But we may suffer far more than financially because of its self made troubles
China wants to be the biggest world power
Maybe the only world power
The subject deserved more
Posted by Belly, Monday, 14 January 2019 3:56:53 PM
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http://www.smh.com.au/world/asia/in-his-trade-war-with-china-donald-trump-has-secret-allies-20190114-p50rcq.html
Do not take China for granted
Economically or its intentions as a armed super power
In a world now thriving on division, this country is playing chess with us and we look the other way
Posted by Belly, Tuesday, 15 January 2019 3:45:14 AM
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Belly,

Your comparison with the situation in Japan prior to Dec 1941 is very apt. As Japan was being punished for its territorial adventurism by sanctions from the US, particularly oil sanctions, and because their alternative was to take the Philippines (a US protectorate) and their oil fields, Pearl harbour was intended to head off a US military response. Similarly, China has embarked on territorial adventurism on a smaller scale, but in doing so has managed to piss off most of its neighbours.

If China's economy implodes, the chinese tolerance for the communist yolk is likely to give way to a deep resentment and a common way to divert attention from corrupt and incompetent governance is to stoke the nationalism in the populace with a few skirmishes. These skirmishes could quite easily blow up.
Posted by Shadow Minister, Tuesday, 15 January 2019 7:47:13 AM
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