US Financial Crisis/Bailout, China's Role

[FugitiveVisions]

How will China deal with the US adjustment?
January 9, 2009
by FT

By Michael Pettis

The post-1997 global balance is breaking down, and the world is lurching drunkenly to find a stable new balance. Until now, Chinese overproduction has balanced US overconsumption, leading to China’s massive trade surplus and capital account deficit. Inevitably, however, a reduction in US overconsumption, a necessary consequence of the financial crisis, must force a corresponding reduction in overproduction elsewhere, and China, like it or not, will have to bear the brunt of the adjustment. The US and Europe must design their fiscal and monetary policies in part to ease China’s adjustment, which will otherwise be extremely difficult.

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Michael Pettis basically hit it right on the head. Demand from the West has collapsed, and there is no way for China and other surplus countries to avoid that reality except to promote government spending or domestic consumption. Reliance on exporting is dead in the water, and so is the 'de-coupling' theory.

 

[Hendrik_2000]

How will China deal with the US adjustment?
January 9, 2009
by FT

By Michael Pettis

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Michael Pettis basically hit it right on the head. Demand from the West has collapsed, and there is no way for China and other surplus countries to avoid that reality except to promote government spending or domestic consumption. Reliance on exporting is dead in the water, and so is the 'de-coupling' theory.

From the same professor who not too long ago was predicting the massive influx from hot money will drive inflation. And quoted by every news agency as proof of incoming doom. So much for the prediction. This guy should stick to teaching and forget about being economic commentator In fact now money is flowing out from China because all those speculators loose their shirt. The figure for December is much better according to Wen Jiao Bao and They will speed up the disbursement of stimulus package

 

[pla101prc]

From the same professor who not too long ago was predicting the massive influx from hot money will drive inflation. And quoted by every news agency as proof of incoming doom. So much for the prediction. This guy should stick to teaching and forget about being economic commentator In fact now money is flowing out from China because all those speculators loose their shirt. The figure for December is much better according to Wen Jiao Bao and They will speed up the disbursement of stimulus package

well we should go easy on economic commentators and economic professors cuz their predictions never came out correctly anyways...and the occasional few that do miracly correspond with fact are ignored or intentionally suppressed LOL. if i remembered correctly Wen Jiabao said he wants China to be the first to recover from the financial crisis. good luck on that.

 

[Rising China]

There is no reason not to believe that China will be the first country to bounce back strongly from the influence of the financial turmoil in the West.

China sees ‘success’ in offsetting crisis
By Patti Waldmeir in Shanghai

Published: January 11 2009 19:32 | Last updated: January 11 2009 19:32

Wen Jiabao declared China’s efforts to offset the effect of the global economic slowdown an “initial success” on Sunday as the economy performed “better than expected” last month.

The premier’s hints that the country’s economy might not be locked in a downward spiral will be seen as good news in the rest of the world, where Chinese growth is viewed as a potential palliative for the global recession.

Speaking during a three-day visit to industrial regions in eastern China, Mr Wen said sales at some companies had begun to rebound, stockpiles were falling and electricity consumption was rising.

“We have achieved initial success from the policies we adopted to counter the financial crisis,” the premier said, according to China National Radio.

Beijing announced an economic stimulus package of Rmb4,000bn ($585bn, €434bn, £386bn) in November, heavily weighted towards construction and heavy industry. It was not expected to improve economic growth until the middle of this year but some industries, such as steel, have already shown more confidence since the stimulus package was announced. Scores of Chinese steelmakers have resumed production in the hope that it will lead to a sustained recovery in steel prices.

Mr Wen vowed that the central government would take other measures, including large investments, to combat the crisis before the legislature’s annual meeting in early March, according to a speech published separately. The measures would include accelerated investment worth a total of Rmb600bn in six projects, originally approved as scientific and technological investments over the medium- and long-term.

Chinese exports fell 2.8 per cent in December, at least one percentage point less than expected, Dow Jones reported on Saturday. Official figures have not yet been released. Imports also fell sharply Dow Jones reported, indicating that China is suffering not only from the global economic slowdown but also from weakness in local demand, which Beijing had hoped would help sustain economic growth and restrain unemployment.

State media also reported that China plans to spend Rmb9bnbefore the Lunar New Year on January 26 to help those worst affected by the global economic crisis. Some 74m people will receive one-off payments of Rmb100 for those living in the countryside and RMB150 for those living in urban areas.
Copyright The Financial Times Limited 2009

:china::china::china:

 

[pla101prc]

There is no reason not to believe that China will be the first country to bounce back strongly from the influence of the financial turmoil in the West.

China sees ‘success’ in offsetting crisis
By Patti Waldmeir in Shanghai

Published: January 11 2009 19:32 | Last updated: January 11 2009 19:32

Wen Jiabao declared China’s efforts to offset the effect of the global economic slowdown an “initial success” on Sunday as the economy performed “better than expected” last month.

The premier’s hints that the country’s economy might not be locked in a downward spiral will be seen as good news in the rest of the world, where Chinese growth is viewed as a potential palliative for the global recession.

Speaking during a three-day visit to industrial regions in eastern China, Mr Wen said sales at some companies had begun to rebound, stockpiles were falling and electricity consumption was rising.

“We have achieved initial success from the policies we adopted to counter the financial crisis,” the premier said, according to China National Radio.

Beijing announced an economic stimulus package of Rmb4,000bn ($585bn, €434bn, £386bn) in November, heavily weighted towards construction and heavy industry. It was not expected to improve economic growth until the middle of this year but some industries, such as steel, have already shown more confidence since the stimulus package was announced. Scores of Chinese steelmakers have resumed production in the hope that it will lead to a sustained recovery in steel prices.

Mr Wen vowed that the central government would take other measures, including large investments, to combat the crisis before the legislature’s annual meeting in early March, according to a speech published separately. The measures would include accelerated investment worth a total of Rmb600bn in six projects, originally approved as scientific and technological investments over the medium- and long-term.

Chinese exports fell 2.8 per cent in December, at least one percentage point less than expected, Dow Jones reported on Saturday. Official figures have not yet been released. Imports also fell sharply Dow Jones reported, indicating that China is suffering not only from the global economic slowdown but also from weakness in local demand, which Beijing had hoped would help sustain economic growth and restrain unemployment.

State media also reported that China plans to spend Rmb9bnbefore the Lunar New Year on January 26 to help those worst affected by the global economic crisis. Some 74m people will receive one-off payments of Rmb100 for those living in the countryside and RMB150 for those living in urban areas.
Copyright The Financial Times Limited 2009

:china::china::china:

China can do better than 9bn RMB man. maybe the economy is bad but we all know the government has cash...why not spend a lil more like maybe 150bn RMB and another 50bn in reserve to give out in case of local uprisings

 

[Autumn Child]

you have to be careful with spending as we do not want to see it directly impact inflation at this time (especially on food items).

 

[FugitiveVisions]

From the same professor who not too long ago was predicting the massive influx from hot money will drive inflation. And quoted by every news agency as proof of incoming doom. So much for the prediction. This guy should stick to teaching and forget about being economic commentator In fact now money is flowing out from China because all those speculators loose their shirt. The figure for December is much better according to Wen Jiao Bao and They will speed up the disbursement of stimulus package

lol and China did have inflation during the period of hot money flows.

I'm not sure what figure Wen Jia Bao is talking about but the export numbers from Taiwan and SK have completely collapsed, dropping 40% year on year in the month of december. Where do Taiwanese exports usually end up? In China, where they are assembled and shipped to the West.

Corruption and legal ambiguity that exist everywhere in China has to be one of the main reasons for the lack of corporate investment over the past few years. It's time for real reform before this whole thing kicks the CCP in the [censored].

 

[Schumacher]

How will China deal with the US adjustment?
January 9, 2009
by FT

By Michael Pettis

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Michael Pettis basically hit it right on the head. Demand from the West has collapsed, and there is no way for China and other surplus countries to avoid that reality except to promote government spending or domestic consumption. Reliance on exporting is dead in the water, and so is the 'de-coupling' theory.

Finally someone decides to quote this Pettis guy.
China announced the multi-billion dollar stimulus to the world & has talked of boosting domestic demand I don't know how many times already. So I think Pettis is stating the obvious here as to the need to boost domestic demand.
The last GDP figure available was 9% & 'de-coupling' theory is dead ?

Agree with Hendrik_2000. I wouldn't pay too much attention to Pettis. When the economy is hot, he 'predicted' abt hot money inflow, now that it's cooled he 'predicts' abt outflow. He falls under the category of 'analysts' out there who pick & choose info to fit the views he wants to present. He casts doubt on the reliability of the Chinese retail sales figure when it fails to fall as quickly as he likes.

He also got into a long argument as to whether the source of China's inflation last few yrs were 'monetary' or pork prices. Not to say which is more right, but when one have a major food, like pork, price doubling due to pig disease, it's silly to dismiss it as a major factor.
I think it presents a picture of someone with narrow academic views of things which is bad when applied to something as complex as the economy

 

[FugitiveVisions]

The last GDP figure available was 9% & 'de-coupling' theory is dead ?

9% is the approximate GDP growth for the year. If you strictly look at the last quarter, during which trade has really fallen off, the rate of growth has slowed dramatically. If you want to test whether de-coupling holds, it would be a good time to do so when demand from the West falls off. Right now, it's falling off a cliff.

China was able to avoid social instability during the late 90s in large part due to the ability of the private manufacturing sector to pick up workers as fast as the SOEs were dumping them off. Right now, the private manufacturing sector has fallen off a cliff, and it remains to be seen how public works, on what scale would really make an impact.

All of these industries are connected, so a drop off in manufacturing shouldn't be viewed in a vaccum but rather in a context where it also affects the demand for service sector and raw material sector products. For example, as construction drops off, the demand for steel and concrete makers have cooled, and the demand for repair and maintenance services as well as other administrative personnel have also dampened. It's a vicious cycle and hopefully effective action will be taken.

Don't think the Chinese gov't isn't worried. The words and actions speaks panic and confusion. You have officials openly talking about this year as being one of the most difficult years in terms of preserving social stability. And that's coming out of the mouths of officials who don't speak lightly on matters concerning the economy and especially concerning domestic security.

 

[pla101prc]

lol and China did have inflation during the period of hot money flows.

I'm not sure what figure Wen Jia Bao is talking about but the export numbers from Taiwan and SK have completely collapsed, dropping 40% year on year in the month of december. Where do Taiwanese exports usually end up? In China, where they are assembled and shipped to the West.

Corruption and legal ambiguity that exist everywhere in China has to be one of the main reasons for the lack of corporate investment over the past few years. It's time for real reform before this whole thing kicks the CCP in the [censored].

lol if you wanna know what is really going on in China you gotta pay attention to the news. everyone knows about the inflation last year. but the truth is that the CCP managed to fend them off. unlike vietnam who suffered 20% inflation with prolly a lot less hot money. so that only proves that the CCP have grown to become extremely competent in dealing with these financial issues since the south east asia political meltdown. it was on the news a few days ago that the hot money is flowing out. prolly to save their own ***. but the thing is the amount of hot money flowing out has to be bigger than the country's foreign reserve in order to "win".(i dont know why my prof told me) since that didnt happen, these hot money have contributed more to China's economy than any damage they have done, because they are also considered as FDI. so its a watered down version of HK vs soros in 98. its almost impossible to use purely economic apparatus to hinder a major power's economy. soros tried it in britain in 92 and it didnt work. even for japan's case the US had resort to political pressure. in my years or studying the CCP i have learned that if there is one thing the CCP is good at it is learning from the experiences of everyone they've laid their eyes on. and yeah Wen Jiabao said the eco performance for dec was better than expected.