Korean Job Discussion Forums :: View topic - China to zero percent growth?

Speak Korean Now!

Teach English Abroad and Get Paid to see the World!

Korean Job Discussion Forums
"The Internet's Meeting Place for ESL/EFL Teachers from Around the World!"

FAQ

Memberlist

Usergroups

Profile

China to zero percent growth?
Goto page 1, 2, 3 Next

Korean Job Discussion Forums Forum Index -> Current Events Forum

View previous topic :: View next topic

Author

Message

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 8:07 am Post subject: China to zero percent growth?

Maybe possible, if the property market sinks enough:

Quote:

China Property Slump Threatens Global Economy as Growth Slows

Dec. 2 (Bloomberg) -- House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.

Construction of homes, offices and factories fell at least 16.6 percent in October after rising 32.5 percent a year earlier, according to Macquarie Securities Ltd. That's squeezing an economy already slowed by recessions in the U.S., Japan and Europe that have cut demand for exports. Building is the biggest driver of China's expansion, contributing a quarter of fixed- asset investment and employing 77 million people.

The central bank cut its key interest rate by the most in 11 years last week and the government said �forceful� measures were needed to arrest a faster-than-expected economic decline. Without more rate cuts and government spending, China is unlikely to contribute the 60 percent of global growth Merrill Lynch & Co. forecasts for next year, further slowing the world economy.

�China is now at the heart of the global slowdown,� said Jim Walker, chief economist at Asianomics Ltd., an economic advisory firm in Hong Kong. �It means that global growth is probably going to be dragged down close to zero next year.�

Walker, voted best regional economist in an Asiamoney magazine brokers' poll for 11 years through 2004 when he worked for CLSA Asia Pacific Markets, estimates China will grow zero to 4 percent next year, with a 30 percent chance of a contraction.

In 2005, China vaulted past the U.K. to become the world's fourth-largest economy, after expansion averaged 9.9 percent annually for the previous 30 years. GDP has increased 69-fold since Deng Xiaoping began free market changes in 1978. China accounted for 27 percent of global growth last year.

'Close to Zero'

The World Bank last week slashed its forecast for China's expansion next year to 7.5 percent, the slowest in almost two decades, from 9.2 percent in the previous quarterly report, saying the country could no longer rely on overseas consumers.

�The real estate sector has seen a particularly pronounced slowdown,� said Louis Kuijs, a senior economist at the World Bank in Beijing. �Real estate investment growth is now close to zero.�

China's export orders and output shrank in November by the most since records began as the global financial crisis sapped demand for the nation's toys, textiles and computers.

Exports and property together have contributed about half of the expansion in China's GDP, estimates Shanghai-based Andy Xie, an independent analyst who was formerly Morgan Stanley's chief Asia economist.

�That growth is gone,� he said. �Can the government make it up with something else? It's going to be tough.�

Merrill Forecast

Merrill's forecast of 1.5 percent global growth next year is based on an 8.6 percent expansion in China. The prediction on Nov. 21 came 12 days after China announced a 4 trillion yuan ($586 billion) stimulus plan, mostly for public works projects.

�In order to curb an excessive economic slowdown, we must adopt forceful measures that have a noticeable impact,� said Zhang Ping, chairman of China's top economic planning agency, on Nov. 27. �Some economic indicators weakened further in November, showing a faster decline.�

President Hu Jintao on Nov. 30 said the economic slump is a test of his administration's ability to govern.

The government is trying to limit fallout from the slowdown for fear that rising unemployment may lead to social unrest. Police and security guards last week attempted to breakup demonstrations by fired workers who overturned a police car, smashed motorbikes and broke company equipment in southern Guangdong province, the state-run Xinhua news agency reported.

'Massive Policy Stimulus'

A second stimulus package to boost consumption may be imminent, the Beijing-based Economic Observer reported Nov. 24. Measures being considered include raising income-tax thresholds, higher salaries for state workers and increased subsidies for low-income groups, the newspaper said, citing people involved in discussion of the plan.

China has room to spend even more than already announced because it has debt equal to 15.7 percent of gross domestic product -- compared with 75 percent in India -- a budget surplus and the world's largest currency reserves at $1.9 trillion, said Lu Ting, a Hong Kong-based economist with Merrill Lynch.

�Investors should prepare for massive policy stimulus,� Lu said.

Shanghai house prices fell 19.5 percent in the third quarter from the previous three months, according to real estate broker Savills Plc. Declines in apartment values are accelerating in Shenzhen and Guangzhou, two of the fastest growing cities in Guangdong province, which produces 30 percent of China's exports.

Construction will contract 30 percent next year after expanding 9 percent in the first three quarters of 2008, according to Macquarie Securities.

'Property Is the Epicenter'

�If real estate contracts by 30 percent it doesn't matter how much the government spends on infrastructure, the economy is still going to be very weak,� said Paul Cavey, a Hong Kong-based economist at Macquarie who forecasts a 6.6 percent expansion next year. �Property is the epicenter of economic weakness.�

Slumping demand for commodities is already reverberating beyond China's shores. Melbourne-based BHP Billiton Ltd. last week abandoned plans to buy Rio Tinto Group and create the world's biggest mining company, blaming a rout in commodities prices. China is the world's biggest metals buyer and the second- largest consumer of oil.

Fortescue Metals Group Ltd., Australia's third-largest iron ore exporter, last week suspended work on a railroad that will carry the steelmaking ingredient to port. Australian mining companies may delay $50 billion of projects, reducing investment that accounts for a third of GDP, Credit Suisse Group AG said in a report last month.

Commodities Slowdown

�China is a huge source of demand for commodities, and now its slowdown is a key reason behind the collapse of commodity prices,� said Nicholas Lardy, a senior fellow at the Washington- based Peter G. Peterson Institute for International Economics. �It's experiencing the sharpest deceleration of economic growth since reforms started 30 years ago.�

Steel prices in China have tumbled because of the slowdown in construction, which accounts for 38 percent of demand, according to Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. Spot prices of hot-rolled sheet have plunged almost 40 percent since the end of June to 3,594 yuan a ton.

Zhengzhou-based Bayannur Zijin Nonferrous Co. is reducing zinc output by 30 percent as demand for the metal declines, it said Nov. 19. Zinc, which is used as a protective coating for iron and steel used to build homes and make cars, has tumbled 49 percent this year on the London Metal Exchange.

Fallout for Neighbors

For every 1 percentage point growth in China's economy, the rest of Asia will be boosted by half that, says Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong.

Countries with the most at stake are Taiwan, which shipped almost 36 percent of its exports to China last year; South Korea, 25 percent; and Japan, 19 percent, according to UBS AG.

Taiwan's export orders from China and Hong Kong dropped 23 percent in October, the biggest decline since 2001, the government reported Nov. 24.

Concern over a slowdown spurred China to cut interest rates by 1.89 percentage points since September and end restrictions on bank lending. To encourage home sales it trimmed mortgage rates, taxes and down-payments for first-time home buyers.

That's a U-turn from the first half, when Central Bank Governor Zhou Xiaochuan was focused on fighting inflation that rose to a 12-year high of 8.7 percent in February. It dropped to 4 percent in October.

The slump in residential and commercial building may undermine efforts to buoy the economy.

�The global financial crisis won't get China to zero percent growth and neither will recession in developed economies,� said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong. �If there's a collapse in the property market that might do the job.�

I believe the CCP says that 8% is the least necessary to maintain 'social harmony'. 0%, or 1-4%, would be very bad.

Kuros

Joined: 27 Apr 2004

Posted: Tue Dec 02, 2008 9:53 am Post subject:

Mises, This is a really bad habit. You must post the link, man. You must.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 9:55 am Post subject:

http://www.bloomberg.com/apps/news?pid=20601109&sid=ay7HZbCLGLEA&refer=home

Kuros

Joined: 27 Apr 2004

Posted: Tue Dec 02, 2008 10:00 am Post subject:

Okay, now I'm officially worried. The likelihood of social unrest in China is quite serious, and is a danger to the entire world. Crap.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 10:07 am Post subject:

Kuros wrote:

Okay, now I'm officially worried.

The likelihood of social unrest in China is quite serious, and is a danger to the entire world.

Crap.

Yeah, tis not good.

sharkey

Joined: 12 Oct 2008

Posted: Tue Dec 02, 2008 10:07 am Post subject:

Kuros wrote:

Okay, now I'm officially worried.

The likelihood of social unrest in China is quite serious, and is a danger to the entire world.

Crap.

are you scared of everything? if anything i thought you would be happy with this becuase if the people are able to press for democracy and everyone knows democracy is always rational and stable, unlike communism and socialism

relax kuros, for once in your life, it cant be any worse then what happened in Pakistan this past year. Take a deep breath, calm your nerves, its going to be alright! Laughing

Kuros

Joined: 27 Apr 2004

Posted: Tue Dec 02, 2008 10:10 am Post subject:

sharkey wrote:

Kuros wrote:

Okay, now I'm officially worried.

The likelihood of social unrest in China is quite serious, and is a danger to the entire world.

Crap.

Oh, that's mean. Comparing China to Pakistan is not going to make me feel better.

Really I may just be deferring my anxiety about exams to the real world. Outsourcing anxiety. For some reason I feel absolutely serene about ConLaw and Fed Income Tax.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 10:11 am Post subject:

sharkey wrote:

becuase if the people are able to press for democracy and everyone knows democracy is always rational and stable, unlike communism and socialism

Where to start with this....

Firstly, there is absolutely no guarantee that the Chinese people would ask for democracy. This is probably not even likely.

Second, democracy is stable provided democratic institutions are stable. China does not have democratic institutions. It does not have a culture of debate, discussion and dissent.

sharkey

Joined: 12 Oct 2008

Posted: Tue Dec 02, 2008 10:13 am Post subject:

mises wrote:

sharkey wrote:

becuase if the people are able to press for democracy and everyone knows democracy is always rational and stable, unlike communism and socialism

it was sarcasm.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 10:18 am Post subject:

Oh, clearly. Yes. So "everybody" doesn't know? Last edited by mises on Tue Dec 02, 2008 4:58 pm; edited 1 time in total

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 10:30 am Post subject:

Anyways, ignore the idiot.

http://www.stratfor.com/podcast/20081202_hus_red_alert_chinas_output_slumps

http://business.timesonline.co.uk/tol/business/economics/article5257439.ece

Quote:

China can no longer save world

Chinese consumers have no money to keep growth going
Michael Sheridan

If the world was looking for China to save it, the actions of Chinese leaders in the past few weeks suggest they intend to save their own economy first.

China was the greatest contributor to global growth last year - a fitting achievement as the country approached the 30th anniversary of its economic reforms and prepared for the glory of the 2008 Olympic Games.

But this has been a year of tragedy and turbulence. An earthquake took 68,000 lives and will cost billions in reconstruction. The uprising in Tibet and international criticism of the regime�s human-rights record soured the Olympics and damaged China�s image.

Its leaders, preoccupied with stoking up patriotic pride, failed to grasp the impact of the financial crisis. Even before the Olympic flags came down, stock and property markets had plunged, while exports were stumbling. In the past three months, the export sector has tumbled into an abyss.

The Chinese economy is slowing down sharply after almost 30 years of growth and the effects are being felt on the streets.

Riots and demonstrations have been reported in cities across China in protest at a swath of factory closures. Last week hundreds swarmed into an abandoned toy factory in Dongguan, a grimy southern town synonymous with sweat-shops. The protesters destroyed police cars and ransacked offices as managers fled in panic.

Two-thirds of small factories making toys for export have closed in the first nine months of the year. Falling demand and tough new product safety rules in Europe and America mean many will never reopen.

The value of the yuan, which has risen some 20% against the dollar since 2005, has levelled off and may decline. Foreign buyers say China�s cost advantage has already been eroded.

Zhang Ping, the government�s senior planner, predicted mass unemployment next year, saying bankruptcies, production cuts and layoffs will lead to unrest.

The official unemployment rate in Chinese cities is likely to hit 4.5%, the highest in a decade. That total does not include millions of migrants from the interior of the country, many thousands of whom are heading home as companies throw them out of work.

Andy Xie, an independent economist based in Shanghai, estimates that one in five migrants may lose their jobs.

One reason why so many foreign analysts and governments have persisted in false optimism about China is that this has been a slow-motion crisis.

Third-quarter figures, which showed slowing growth, failed to capture the turmoil in the financial system after the bankruptcy of Lehman Brothers and a collapse in export orders for Chinese factories at trade fairs in October.

China�s growth and export figures for the last quarter of this year are expected to reveal the scale of the slowdown.

Official data to November from export-orientated Guangdong province, responsible for 12% of Chinese GDP last year, indicate that its growth has already been cut by a third.

�Guangdong will face a harsh environment with increasing uncertainties and unstable factors,� said Li Miao-juan, a provincial official.

The traditional consensus among economists is that China needs at least 8% growth to sustain its growing population of working age. Forecasts by independent analysts now range as low as 5% growth for next year.

Fears in Beijing of the consequences led the People�s Bank of China (PBOC) to cut its bench-mark lending rate by 1.08% to 5.58% last week, the sharpest reduction since the Asian financial crisis of 1997.

It was a reversal of policy that came after rumours of discord in the secretive circles at the apex of power. There is persistent talk among Chinese financiers that central-bank governor Zhou Xiaochuan was forced to make a Mao-era �self-criti-cism� at internal party meetings for failing to grasp the serious threat posed by America�s sub-prime crisis.

�Some party leaders are enraged that the PBOC went on flourishing its inflation-fight-ing credentials long into the summer when it was clear the situation was grave,� said an international investment banker who asked not to be named.

The central bank has now endorsed a $586 billion (�382 billion) spending package to stimulate the economy. It aims to boost domestic demand by spending on infrastructure such as railways, roads and air-ports. The government will also pour money into earthquake reconstruction, environmental protection and rural housing.

But a closer look at the figures showed that much of the money was already allocated under the 2006-10 five-year plan. It also emerged that Beijing was seeking to raise some of the funds from local governments and private businesses. The effects of the stimulus plan on stock-market confidence proved short-lived once these details were appreciated.

The great hope cited by many foreign economists is that hundreds of millions of Chinese consumers will shed their caution, take out their savings and start to spend.

The reality is that for all the five-star glitz of downtown Shanghai and Beijing that foreign grandees see on their visits, most Chinese people have limited cash to hand.

Thirty years of economic reforms created a system that may look like capitalism but it is not a free market. The monopoly of political power has granted huge rewards to a clique of officials dispensing patronage to their client businessmen.

�Stock prices in Shanghai move on the word of a few,� said a retail broker. �The retail investor counts for nothing.�

The exposure in public trials of the most egregious examples of corruption have fuelled disenchantment among the Chinese public and renewed support for leftists inside the party.

Statisticians measure China�s inequality ratio as one of the most distorted in the world, as if reforms had unleashed an excessive reaction to decades of Maoist egalitarianism.

While the new super-rich enjoy dazzling wealth, an investigation by The Sunday Times among workers at Adidas factories in Fujian province this year found that even in nominal terms many had not seen a wage rise in a decade.

While investment bankers in Hong Kong have talked gaily of a notional $2 trillion in household savings just waiting to be mobilised, Chinese banking analysts paint a very different picture. One analyst puts average household savings at 4,000 yuan, or �382. Many Chinese will see such money as reserves for a medical emergency, schools or care in old age.

And when China�s economy, notionally the fourth-largest in the world, is adjusted to take account of its 1.3 billion population, the country ranks 109th in the world, according to the International Monetary Fund.

Stephen Green, head of China research at Standard Chartered, has cited a per-capita GDP figure of $2,000 to deflate expectations that the Chinese consumer will come to the rescue. �It is simply not reasonable to expect a consumption boom,� he said.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 2:59 pm Post subject:

Kuros wrote:

The likelihood of social unrest in China is quite serious, and is a danger to the entire world.

Why do you say the unrest is a threat to the world? Do you mean that it could spill over the borders or that China would turn against Taiwan (for example) to deflect ire?

My 2cents is that Chinese growth at or near 0% (say 0-4%) means global depression.

Kuros

Joined: 27 Apr 2004

Posted: Tue Dec 02, 2008 4:00 pm Post subject:

mises wrote:

Kuros wrote:

The likelihood of social unrest in China is quite serious, and is a danger to the entire world.

I don't think it will necessarily become a direct security threat, although I cannot rule it out. But the impacts of a political collapse in China would have adverse and serious economic and climate effects on the rest of the world, not to mention the potential for refugees and political asylees.

If the upside of globalization is the creation of the win-win situation, the downside has to be that when one country loses, especially a large one like China, the entire world also loses to a lesser extent.

TheChickenLover

Joined: 17 Dec 2007
Location: The Chicken Coop

Posted: Tue Dec 02, 2008 4:11 pm Post subject:

Communism never succeeds. It's only held up by controlling the information given to the masses & quietly removing those who ask too many questions. The internet has changed this for China. I would suspect that in the not so distant future you will see China implode either through war or 'revolution' through their desire to have better control over their lives than the current administration allows them to have. Time will solve this. In the end, this financial crisis can be a hidden blessing to the most populated country of oppresed people on the planet. Chicken

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Dec 02, 2008 4:56 pm Post subject:

Sudden changes can go either way. If China hits 0%, or something close to, Kuros is right that there could be serious political instability. It is impossible to predict what would be born in a crises. And given the cultural and historical realities of modern China, compounded by the severe inequality and dramatic regional imbalances, I don't feel at all comfortable in assuming that what would be born then would be at all better than (meaning more open, more liberal) what they have now.

Display posts from previous:

	Korean Job Discussion Forums Forum Index -> Current Events Forum	All times are GMT - 8 Hours Goto page 1, 2, 3 Next
Page 1 of 3

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum

TEFL International Supports Dave's ESL Cafe