The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
The Forum - On Line Opinion's article discussion area



Syndicate
RSS/XML


RSS 2.0

Main Articles General

Sign In      Register

The Forum > Article Comments > The Rudd strategy Part II: just how good is China's economy? > Comments

The Rudd strategy Part II: just how good is China's economy? : Comments

By Arthur Thomas, published 6/11/2008

Could China's robust economy be a fragile house of cards built on shaky policies and phantom numbers?

  1. Pages:
  2. Page 1
  3. 2
  4. All
This is an eye opener. The prevailing assumption in Canberra is that Chinese demand for resources will keep the good times going in Australia for the foreseeable future. Up til now it has been unthinkable that our resource industries could lay off workers. If China falters Australia's terms of trade will worsen and there may need to be a halt to immigration. The kneejerk reaction will be to keep the party going. For example I fear that Rudd will offer China some cheap coal to go with some cheap iron ore, Kyoto be damned. Short term thinking will overrule long term, which is that we may all have to live with less.
Posted by Taswegian, Thursday, 6 November 2008 8:20:12 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Some good food for thought and discussion points. However,more analysis is needed to put it into proportion. In particular, what is China's capacity to crank up internal infrastructucture development- as all countries are aiming to do? As a command economy, China can do this more readily than most countries. As much of infrastructure requires steel and cement- ie coal and iron ore- this means better news for Australia than other countries. But how much and when are the critical questions. Although the global credit crisis has been due mainly to overconsumption of unproductive consumer goods, the world is not faced with dysfunctional productive systems- as it was after WWII. Notwithstanding the critical pollution/global warming issues, economic recovery should not be a technical problem- it will just take time.
Posted by Jedimaster, Thursday, 6 November 2008 10:20:59 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
"Could China's robust economy be a fragile house of cards built on shaky policies and phantom numbers?"

Of course it could - just look at the 'free market' superpower competitor that the so-called 'Chinese communist' leaders employ as a model for their internal and inter-national economic relations.

China's 'reckless growth at all costs' is simply following neo-liberal economic theory/ideology, with the 'externalities' of environmental degradation, rapidly rising mass unemployment and social dislocation to be bourne by the Chinese working class - including several million additional university graduates each year - whilst the surplus value/profits from such rapid 'progress' to date are spirited away in numbered bank accounts by their 'communist' leaders, foreign investors, entrepreneurs and corporate banksters!
Posted by Sowat, Thursday, 6 November 2008 1:14:36 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
While we can expect China's demand for Australian raw materials to reduce for a while as the Chinese digest the implications of the recession, we can also expect demand to return to high levels reasonably quickly. China has two advantages: it can redirect investment to domestic infrastructure pretty quickly - and solve a few home grown demand issues in the process; and it has huge capital reserves, mostly in US dollars, so that funding infrastructure will not be a problem.

India, on the other hand, depends on foreign capital to fund its growth. Borrowing is not going to be easy for the next few years so an Indian slow down is likely to be more severe and more prolonged than any short term Chinese reduction.
Posted by Senior Victorian, Thursday, 6 November 2008 1:54:07 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Senior Victorian

That rosy outlook suggests that you either naively rely on Chinese media and official releases for your confidence, or you should sack your research staff.

Your expectations for "demand to return to high levels reasonably quickly" overlooks the dynamics of China's economy, its reliance on the global economy and especially that of the US.

Your reference to ".. China has two advantages" also reflects naivety.

Your reference to China's ".. huge capital reserves, mostly in US dollars, so that funding infrastructure will not be a problem" lacks basic research and understanding of the input, maintenance and even reliability of the numbers in that reserve. Don't forget that China's massive energy import bill is paid in US dollars.

Your reference "it can redirect investment to domestic infrastructure pretty quickly - and solve a few home grown demand issues in the process" is over simplistic and again lacks a true understanding of the challenge that that reference represents.

May I suggest that you start out with some personal detailed research into China's Sovereign risk?

Follow that up with simple things such as China's national debt and items excluded. Check out the items under "special mention" in China's four major bank reports.

Arthur's article provides you with many leads. You may also like to check which construction and developer companies are state owned (or have close links with the State) and what banks provide them with credit. Do some number crunching on the projects as well. You can follow that up with checking which ones have inventories of unsold floor space and properties under construction with minimal buyer interest and increasing defaults.

As a senior you may just have the time.

Your reference to India is also naive and over simplistic. Both India and China rely on foreign exchange and FDI to carry their economies. You also overlook the advantages that India has over China.

Good luck with the research. I am sure that you will find it enlightening.

Expat China Journo
Posted by expat China Journo, Friday, 7 November 2008 2:24:37 PM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Taswegian

China already has more hi-quality coal steaming and coking coal that it can now currently use from newly developed mechanised open cut mines and rail links.

China also has over 80 million tonnes of iron ore in stockpiles at steel mills, sea ports and ships off shore. It also is committed to long term contracts. Steel mill shut downs across China are effectively cutting demand for any ore imports now and in the near future. The problem is not just related to iron and steel.

Your assumption on migration is correct when relating current employment to the resource sector industries,shortages of workers in the lower paid non resources industries and need for guest workers.

A hit on the resource industry could in fact see a return of workers to the non resource sector and a cut in earnings, providing that the consumer economy is rolling along and that is not looking too good when considering revised credit laws and new credit standards by providers.

It just may be time to review the socio-economic effect of globalization and consider the possibility of bringing industries back to their original bases and matching that with an economy that reverts to where house prices and asset purchases are related to earnings and positive equity in financing.

Nothing stays the same forever.

The Rudd Government somberely proclaimed that there are hard times ahead. It hasn't realised yet, just how much.

Arthur Thomas
Posted by Arthur T, Friday, 7 November 2008 5:33:58 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
  1. Pages:
  2. Page 1
  3. 2
  4. All

About Us :: Search :: Discuss :: Feedback :: Legals :: Privacy