Tag Archives | credit bubble

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China battles economic slowdown

Wenzhou in coastal Zhejiang province was the first city to encourage private enterprise when China began opening its economy in 1978. Its growth accelerated after China joined the World Trade Organisation in 2001, attracting 2.8 million migrant workers to join the city’s population. Now its 9 million people are at the forefront of China’s slowdown, […]

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PE demand decline highlights China risks

China’s slowdown is continuing to gather pace. Polyethylene (PE) demand has been a very reliable leading indicator for the economy. Its 50% growth between 2008-10 highlighted the overheating economy, as the government stoked a credit bubble, even whilst official GDP growth reports were reassuringly low. GDP numbers, however are merely targets. Likely future premier Li […]

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A China ‘hard landing’ gets closer

China’s leadership remain preoccupied with the transition to a new politburo in October, and the continuing fallout from the Bo Xilai affair. Equally, April’s 7% rise in food price inflation remains a major issue for a country where 96% of the population earn less than $20/day. Data for April bank lending and electricity consumption highlights […]

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China lending jumps to hit $380bn Q1 target

China’s leaders have a lot to worry about. The purge of Bo Xilai has now been followed by news of his wife being suspected of murder. This makes the run-up to October’s leadership transition even more difficult. Only 3 months ago, Bo was being tipped by some to join the Politburo, and even to become […]

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A China ‘hard landing’ may be unavoidable

Saturday’s blog post highlighted the risk of a hard landing in China. This risk is very real, and is centred on the government’s need to achieve a difficult balance between reducing today’s high rate of food price inflation, whilst not collapsing the property market. House prices are now falling in 60 Chinese cities. An excellent […]

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The banana skin risk

This week’s news provided more evidence to support the blog’s fear that the global economy is close to recession: • The German economy, Europe’s motor, saw negative growth in Q4 • US retail sales grew just 0.1% in December, despite good auto sales • China’s auto sales fell in Q4, and house prices fell in […]

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China’s producers lose pricing power

China’s economy is slowing rather fast. That’s the only conclusion to be drawn from the above chart. It shows a major collapse in producer price inflation (PPI), from July’s 7.5% peak to just 2.7% in November. The decline from September’s 6.5% level has been particularly dramatic, with the index down nearly 2/3rds in just 2 […]

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China’s Minsky Moment may be starting

Long-standing readers may remember the video posted in January 2010 showing ‘China’s empty city’. This was the new city being built in Inner Mongolia, to help ensure local officials met China’s GDP growth target. Unlike the West, GDP in a communist country is a target, not a result. Thus East Germany under communism was alleged […]

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China’s debt problems multiply

It seems increasingly clear that China’s economic policy took a wrong turning 10 years ago, when it joined the World Trade Organisation. 2001 was also the year when the Western BabyBoomers (those born between 1946-70), began to leave the peak consumption age group of 25-54 years. As they entered the 55+ age range, and the […]

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China’s lending continues to tighten

Financial bubbles are like balloons. Only instead of air, they need to be constantly pumped up with new lending. Otherwise they begin to deflate, and the Minsky Moment occurs. The above chart of China’s bank lending shows, as discussed last month, that the Minsky Moment is getting close. August’s lending (red square) was exactly the […]

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