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China-Japan-Koreas
It’s the Economy, Stupid!
2004-07-07
We’ve had several discussions here about the Chinese economy. Here’s a NY Times piece [reg req] that sounds an alarm that I’ve been anticipating for some time.

[snip]The torrid Chinese demand for raw material last fall and winter has largely evaporated, as credit-starved companies drew down their supplies and stopped placing new orders. Prices slumped in commodities markets as a result. As the lines of ships waiting to unload cargo at Chinese ports dwindled, ocean bulk freight rates tumbled as well, falling by more than half on some routes after shooting up seven or eightfold last year and early this year.

But shortages of coal, and the freight cars to haul it, remain acute in China. Summer blackouts are spreading across Chinese cities, forcing factories to close for days at a time as power plants struggle to keep up with demand from the country’s many new industrial complexes and even more air-conditioners.

With state-owned banks suddenly restricting what had been a flood of loans, borrowers are starting to run into trouble in regions that relied heavily on this lending, including the northeast and the region around Shanghai.

There have been fewer problems here in southeastern China, where construction cranes still work seven days a week and exporters get less of their financing from Beijing and more from Hong Kong and abroad. [snip] The multiplier effect is running into its upper limit. Money really doesn’t grow on trees, and the vast exports to the United States can only finance so much. Cue ticking time bomb.
Posted by:Chuck Simmins

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