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More good economic news – China headed towards collapse (maybe, possibly, who the hell really knows)

November 11, 2009

With 8.9% GDP growth and an expanding middle class China was supposed to be the savior of the world economy. The theory was that they would replace the demand for consumer goods that has dried up in the US and Europe and everything would return to an even keel.

Good theory I guess, but what if China has been cooking the books on their economy?

…(T)here’s a growing group of market professionals who see a different picture altogether. These self-styled China bears take the less popular view: that the much-vaunted Chinese economic miracle is nothing but a paper dragon. In fact, they argue that the Chinese have dangerously overheated their economy, building malls, luxury stores and infrastructure for which there is almost no demand, and that the entire system is teetering toward collapse.


(Jim) Chanos and the other bears point to several key pieces of evidence that China is heading for a crash.

First, they point to the enormous Chinese economic stimulus effort — with the government spending $900 billion to prop up a $4.3 trillion economy. “Yet China’s economy, for all the stimulus it has received in 11 months, is underperforming,” Gordon Chang, author of “The Coming Collapse of China,” wrote in Forbes at the end of October. “More important, it is unlikely that [third-quarter] expansion was anywhere near the claimed 8.9 percent.”

Chang argues that inconsistencies in Chinese official statistics — like the surging numbers for car sales but flat statistics for gasoline consumption — indicate that the Chinese are simply cooking their books. He speculates that Chinese state-run companies are buying fleets of cars and simply storing them in giant parking lots in order to generate apparent growth.


Not exactly confidence inspiring. I wish I knew more economics so that I could understand this stuff better.

3 Comments leave one →
  1. genes permalink
    November 11, 2009 2:14 pm

    I thought Walmart sales were up.

  2. max permalink
    November 13, 2009 1:03 pm

    I’ve seen similar “empty” cities in China for the last 15 years. And over a few years, these cities have (so far) inevitably filled up.

    The Tsinghua professor quoted in the original news report is exactly right in that regard. All of the previous rounds of physical infrastructure in China has paid off economically and socially.

    There are two numbers which define China, and is far more important than GDP in any given year:

    1) population: 1.3 billion and counting.
    2) urbanization rate: 45% and climbing.

    China’s urbanization rate will rise to 70% by 2035. If you do the math, that means 325 million Chinese currently living in rural villages will move to urban cities within the next 25 years.

    And if you do the math again, that means:

    – for every square foot of real estate currently in existence in China… it’ll be doubled over the next 25 years.

    – it also means building 15 New York’s from scratch over the next 25 years.


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