In the typical arrogant style, Americans think that if the USA were to sink into deep depression then so would the entire world. I have been pointing out for years that this soon would not be true. Well it appears "soon" arrived even earlier than even I thought: "{There has been discussion about}...how badly China's economy could be hurt by an American recession and also the extent to which Chinese spending could help to prop up the rest of the world economy. Some new figures suggest Chinese demand is rising strongly enough to help offset the increasing weakness in China's export markets. That could be good news for the world at large. It is certainly true that China's current-account surplus rose to a record 10% of its GDP last year, which means that it produced a lot more than it consumed and so relied on foreigners to buy the excess. But it is the change in a country's trade surplus, not its absolute size, which matters for GDP growth. The increase in net exports (exports minus imports) has never been the main source of China's growth. It contributed two to three percentage points to annual GDP growth between 2005 and 2007, whereas domestic demand* (consumption and investment) added eight to nine percentage points. But the latest figures show that exports have become even less important as a driver of growth. The World Bank's latest China Quarterly Update suggests that net exports contributed only 0.4 percentage points to GDP growth in the year to the fourth quarter of 2007 (see left-hand chart). Overall GDP growth slowed only modestly (to 11.2%) because of faster growth in domestic demand, which contributed an impressive 10.8 percentage points. ..." From: http://www.economist.com/opinion/displaystory.cfm?story_id=10688833 (the current issue) Summary by Billy T: If, in a couple of years more, the US did not buy anything (as dollar collapsed to little value) China's GDP growth might drop to 8 or 9 % per year. Perhaps when US collapses there will be a surplus of oil (priced in current dollars at about $25/barrel) and China will grow even faster without the current economic drag the high cost of energy makes? More of the same in almost all of my posts in this thread. -see some. Once again, the Economist's facts are a few years later than my posts. In a few more years they will have articles on the mechanism of the collapse I have already explained in several threads. I just hope they have the courage to clearly blame GWB. (Doubling the debt; making a needless, expensive war, which reduced oil supplies; tax cuts for the wealthy who saved instead of spent them; tripling the trade deficits, outsourcing jobs for lower cost components has made his wealthy friends even more profits. etc. - Corporate Amererica is making record profits, but Joe American has a forclosure notice tacked to his door.) ------------------ *Up 18.8% YoY (2007 vs 2006) PS I have sevearl times mentioned that China has invented a new economic system - the government guides and funds the infrastructure (new power plant coming on line every 8 days etc) but the Market place supplies the daily needs of the people, in responce to their demands. For good article on the expanding success of the government's part of th economy, See: http://www.economist.com/world/asia/displaystory.cfm?story_id=10697210 (Written to mark the completion, ahead of schedule, of world's largest air port and bridge, but has other facts where China leads the world too are included - However, world's largest dam and China making more than half the world's total, many in Africa, is not even mentioned. China has operated a mag levitated train for years, but only a picture protesting more of them is included.)
Following, less than 3hours old, is from BBC: http://news.bbc.co.uk/2/hi/americas/7460364.stm (I saw it on TV and went to cite to post here.) "...It {Toromocho is a huge montain, (see photo of it at link.) At >15,000 feet higher than (or as high as) any in Europe of very high copper content} could become the most productive copper mine anywhere on earth. Now it belongs, in effect, to China. When open-cast mining begins, in three or four years, a Chinese mining company, Chinalco, will send the copper back home to be turned into electrical wire. ... to carry out the electrification of the whole of China. {Several decades needed to remove the mountain, even with one of the Earth's largest scale mining operations.} Bargain: The Peruvian government is happy with the $3bn (£1.53bn) that Chinalco will invest in the Toromocho mines. The Chinese will be even happier. The copper Chinalco extracts from Toromocho will cost something like US$410 (£210) per ton. Today, the price for copper on the London Metal Exchange was $8,255 (£4,220) - 20 times more. Chinalco stands to make a 2,000% profit on its investment. {not bad for a bunch of communists Please Register or Log in to view the hidden image! }... There is often an instinctive dislike of China's bargaining methods, and the high-handed way many Chinese companies operate abroad. But there is no serious alternative. China is buying up raw materials all around the world, paying for its shopping spree with its vast reserves of foreign currency. {In contrast US is going around world with hat in hand, begging Saudi Arabia for a little more oil it can buy AND for the money it wants the Saudis to lend the US so it can pay for the oil. etc.} Often, as with Toromocho, the Chinese are successful because they can put the cash on the table. Three billion dollars is a very large amount of money for a relatively poor country like Peru. China has become a dominant player in Peru's mining industry. ... China offers Peru cash, and it is prepared to give Mr Garcia its political support. You can see why he would be interested. ..." The above is repeated in dozens of countires, while the US is mainly known for its dropping of bombs, etc.. Who do you think will be leading the world after the dollar run begins?
That's all well and good, Billy, since it fits your personal agenda. But you are overlooking something very, very simple. It's quite likely, especially with China booming so quickly, that they could easily wind up in the same - or worse - economic situation that the U.S. is currently in.
I agree. It is a high risk experiment China's leadership (the CCP) is trying, especially for the CCP, if not all of China. The economic/social structure they have put together is basically untested in human history. They guide the economy in all the major items of infrastructure and let the market place do the rest, within limits, especially if their political control may be endangered (E.g. try to control the internet, even what turns up in searches, etc.) History has shown that "absolute power corrupts, absolutely" but if anything in recent years the CCP has been cracking down on corruption (admittedly most vigorously when done by some of the current "politically outs"), but ordinary abusers of others are going to jail. It will be interesting to watch to see what happens to the builders of the schools that collapsed in the recent earth quakes. China's ability to run rough shod over some in the interest of the many has permitted great material gains for their population that would not be possible in western societies. For example they recently built the World's largest air port in four years from the decision to make it until first passengers disembarked. - That is less time than taken by the public hearings on Heathrow's new terminal! They bring on line a large new power plant every 8 days! I forget the exact numbers but about one/ month is nuclear. The world's highest rail line, longest bridges,* world's largest dams (and builder of 80% now in construction in the world, many in Aftrica as part of long term raw materials supply deals.), only magnetic levitated train in regular service, the world's largest and best ports, world's largest ship yards, user of more than half of the world's steel, etc. all these things speak to their accomplishments in a very short time. One need only compare how the US responded to Katrina and how they did to the earthquake, and the resulting lake endangering millions to see that there is much to be said in their favor. The big question is as you suggest: Is this new social order stable and adaptable without chaotic change process? Will there come a stage when the importance of still better material living conditions is not worth the cost in personal liberties? If so, how will the social structure evolve? - By collapse and chaos or more smoothly? The last election (within the CCP, of course) did give optimistic signs in that compromises were made. It also illustrates how far into the future they plan – the leader of the CCP for starting his five term five years after the election was selected! They have a 50 year plan made up of 10 five year plans – how they can sign 30 year contracts all over the world. The US cannot now plan anything major until after we know if next president is: McCain or Obama. --------------- *A bridge more than twice as long as China’s already world's longest is already under construction and they are seriously studding how to do an unbelievable one between the main land and Taiwan! PS In my last post about China locking up long term material supplies (copper from Peru being the focus of that post.) I forgot to mention that Peru has already become what I have long been forecasting is the fate of Brazil and many others: To become an "economic colony" of China (and Asia in general). This will be more evident and more complete when the US and EU are in deep depression following the run on the dollar.
Quadraphonics are you here still, just lurking? Your relative growth rate argument is clearly no longer valid. Perhaps you now see what I was saying: ------------------ *Text above copied from: http://www.sciforums.com/showpost.php?p=1569852&postcount=571
Look at the current statistics and extrapolate from the data. Based on current trends, China will outpace the US in a decade.
I do not think China is immune to the global economy collapse, if it is starting now. I have in this thread said that would be possible only when the internal demand and the obligations China has committed to in Africa and South America in long term contracts for supplies of energy, food stocks and raw materials will keep all the Chinese factories "humming" with no need to sell to US and EU, but some better informed than me think even now that impact on China will not be great: "...James Trippon, editor-in-chief of China Stock Digest, says the Chinese economy is doing fine even during the global financial crisis. ... China's trade surplus for August set a new all-time record high of $28.7 billion. Exports to the US continued to rise and China's trade surplus with America rose more than 16% to $17.5 billion. Trade with the European Union grew even more quickly, increasing by 25% for a monthly surplus of $16 billion. While it's true that some low-margin exporters have been forced to close down due to the rising value of the yuan, the big picture is one of continuing export growth. Imports are also increasing sharply, up more than 23% for August to more than $106 billion. ... The Asian Bank predicts that will continue to grow at a 10% rate this year and will top 9% next year. ... Last year, China attracted more than $82 billion of foreign investment. If this year's boom continues, outside investment in China will rise by 44.5%. How is it that China seems to defy gravity and continue expanding when much of the world is edging into recession? One answer is coming from China's increasingly enthusiastic consumers. ... Retail sales in China are now growing at the fastest pace since 1999 when China's consumers first tasted the effects of the nation's capitalist transition. In August, the take at China's cash registers was up a stunning 23.2% from a year ago. July sales increased by a similar amount. {BT insert: Forbes said some time back 2007 was up 18.8% on 2006}... What are they buying? Jewelry saw a 44% jump in sales this year. Sales of clothing are up almost 30%. Appliances, high-protein foods, and other items that were once considered luxuries are all experiencing a sales boom as household income in China continues its double-digit growth. .... Earthquake reconstruction in Sichuan province is expected to require the investment of at least $140 billion. The net effect will be an enormous stimulus to keep China's economy humming. ..." {Some of the $700 billion will be invested here, where the returns are better than in US as the Paulson plan gives money to the banks with NO RESTRICTIONS on how it will be used. Republican "Trickle Down" theory is valid - only Joe American is more likely to see it build factories and jobs in Asia and/or buying banks in the oil rich conturies. - As "Billy the Kid" said when asked why he robbed banks: "That is were the money is."} From: http://www.moneyshow.com/investing/articles.asp?aid=GURU-15397&iid=GURU&scode=011415
To epiman: I was given and deserved a 3 day ban for spam. You have been reported for this several pages of ...ooooo... spam and push down of posts. perhaps it will just be removed. If so, this one can be too as both just take storage space, but at least there was a point to this one.
Please Register or Log in to view the hidden image! But that is assuming that the US does NOT sink into depression or even have a recession of signficant duration. Thanks to synthesizer-patel I can now post an image seen elsewhere. If also having trouble see his post at: http://www.sciforums.com/showpost.php?p=2078198&postcount=19
A year ago I would have said yes. With no leadership in Washington and special interests running the show, anything went, including selling out the country for a fast buck. Now with a new administration and a new Congress, there may be hope for The United States.
Here is more on why answer to thread's question is YES: "... McKinsey Global Institute will tell you: “In 20 years, China’s cities will have added 350 million people—more than the entire population of the United States today.” “By 2025, China will have 221 cities with more than one million inhabitants—compared with 35 in Europe today—and 24 cities with more than five million people.” “By 2030, 1 billion people will live in China’s cities…170 mass-transit systems could be built…40 billion of square meters of floor space will be built in five million buildings—50,000 of which could be skyscrapers.” In other words, as China transforms itself from a nation of farmers to a nation of urban dwellers, the equivalent of 10 New York cities will need to be built. Truth is, China will continue to grow. •Despite the collapse in the U.S. •Despite the failure of the U.S. banking system •Despite the demise in the U.S. housing market The reason is simple: With 8% growth, China’s economy is still growing like a weed. Its standard of living is on the rise. And its people are spending like there’s no tomorrow: buying into a much richer lifestyle, filled cell phones, big-screen TVs, and cars—the same things we Americans take for granted. When you consider that by the year 2030 China will have 221 cities with more than one million people living in them, you can only image the kind of money that is going to be made, as China’s newfound consumer class enters the marketplace and replaces the American consumer as the supreme driver of world growth. All thanks to infusion of cash from foreign investors that’s going on behind the scenes now. ..." FROM: 10Nov08 Daily newsletter of RobertHsu@Chinaprofitstrategy.com Billy T comments: Hsu visits China many times each year, has lots of high level contacts both in industry and government, and his facts are rarely wrong. Hsu's Clients tend to be rich and Republican. Thus, the last line, which I made bold, is not called "trickle down" economics. But GWB's tax relief and relaxed regulation with associated huge bonuses, golden parachutes and out-right subsidies (many billions just for the stupid corn to alcohol program) have trickled down to build the most modern auto and other factories in the world in China. Investment always flows to where the returns are greatest. Much of the loss of good jobs in the US is DIRECTLY due to this stupid policy of decreasing Joe American's purchasing power and reducing taxes and giving subsidies to the already rich. Obama will surely reverse this stupidity, but I fear it is too late. The hole GWB and Republican's rule dug for 8 years is just too deep; However, I could be wrong (and hope so) - Obama is very intelligent, calm, deliberate (thinks before he acts - what a change!)* and inspires many. If anyone can lead the US out of this hole, he is the man. ------------------ *That "CHANGE" is the most important change needed, IMHO, and it comes with zero cost on 20Jan09. Quoting from that same issue: "... Warren Buffett’s $230 million investment in China’s leading car and manufacturing company ... " (Hsu does not tell which for free - a typical teaser to get you to pay for his subscriber service.) This "Buffett fact" is a minor example of Republican trickle down in action. Why invest in loser like GM, or any company in US with its negative growth rate when greater that 8% GDP growth in China is assured for decades by the above facts? Probably Chinese GDP growth will be back in double digits again soon because in a few years, China's factories will be hard pressed to meet both the domestic demand and deliver on all the commitments China has made in the 30 year contracts signed with African and South American suppliers of the food stocks, minerals, and energy. (To build roads, ports, hospitals, mines, rail systems, schools, housing units, telephone systems, etc.) China will do nothing to help the people dying in Sudan (Darfur) because in the long run, China need the oil etc there much more than it needs US & EU markets. Etc. for the rest of Africa and South America. With these foreign demands added to the surging domestic demand (up 18.8% in 2007), why would China need the US customers when ONLY THE INCREASE in China's urban population will be more than ALL of the US population in two decades or less? China would not like to see the US and EU sink into depression now as it still wants to sell products to them, but in a decade or less China, will not be able to sell to the US and EU due to these contract requirements and the domestic market demands. Then, as I have been posting for some years, it will be to China's great economic advantage to see US & EU in deep economic depression. (China pays for its imports at global market prices - with significantly reduced US and EU demand most commodities, like oil will cost less than they do today. For example, with US & EU in deep depression, oil will be about $30/ barrel, etc.) Thus China will say: "Go to hell USA. We do not need your markets. Your green paper is worthless now."
And what do you assume that is? Not very likely as: (1) The Chinese people are essentially debt free and huge savers (from the era when the quanity of rice your horded, marked your social standing and power / influence in the local community.) Using the same "total savings index", the US saves less than 15% (mainly as equity in their homes but that is now decreasing in value for negative current savings. Retiring "baby boomers" switching from savers to consumers is also an important factor.). Whereas the Chinese save 54% of their income! (2) The Chinese government holds at least the second largest reserves in the world. Perhas is No.1 (Japan is the other.) China is overwhelmingly a "creditor nation." - Very different from the USA, the world's greatest debtor nation. (3) Their factories are only about 10 years old on average and very modern and efficient. The two basic US production industries (steel and cars) average about 50 years in age - Lack the flexible designs - to switch model types etc. (5) The Chinese long term GDP growth rate could be cut in half and still be twice that of the US's long term GDP growth rate (compared to the current negaive growth in US, it is infinitly greater.) (6) Their urban workers have rapidly growing purchasing power - up 18.8% in 2007 vs 2006, but the purchasing power of Joe American's salary has been dropping during the administration of GWB. (7) Not only can Chinese buy more every year there are 4 times more of them than Americans to shop. - Main reason western funds built all those new, modern factories is that huge, growing and currently very unsatisfied market. Some of the funds were released by "Trickle Down" economics of GWB and the Republicans. (8) In two decades the INCREASE only in Chinese urbanites shopping will be approximately 350 million, - greater than the the entire current US population. As I have stated, China would not like to see the US collapse now but in a few years (10 at the most) the reduction in demand for oil etc. with US and EU in deep depression will be a great net saving, especially great it they (as they are doing) use their sovern funds to buy real assest for part of their reserves previously mainly held as US treasry bonds. Also see why China can stimulate it economy much bettter than the USA at: http://www.sciforums.com/showpost.php?p=2088703&postcount=41 and post 699 of this thread. Given these facts, how can you defend your statement? The only US advantage I can think of is the US does have much more and somewhat higher quality coal. China has built the world's highest railroad in to Tibet (for the wealth of minerals there) and is constructing a large diameter pipeline more than 1000km long to bring the oil wealth of the western provences to the East. Also Russain is builing a large one to China* from the north slope gas fields so it can tell EU to go to hell - we do not need you to buy our gas. ----------------- *Last I read about it more than a year ago, it was still not decided if it ends in China or a southeastern Russian port with tanker distribution to both Japan and China. Japan was offering to finance much of the still to do construction, if that was the termination.
In the paper the other day, news that China's new large program for building up variosu infrastructure (roads, electrical grid, etc) means significant money for Minnesota's iron range, to meet the demand for steel. One thing Billy's otherwise informative approach overlooks is China's coming environmental crunch, which will play hell with their agriculture and water supplies etc. America will be a valuable farm, for the Chinese, long after it is unnecessary as a market.
I do not know much about that ore. I doubt it can be economically (or even is) exported to China. Huge "capsize" dry-bulk ships deliver nearly pure Fe2O3 from Brazil and not quite as high quality iron ore from Australia.* I don't have hard numbers at hand, but think these two countries supply > 95% if China's imported ore. The cost of shipping it in the tiny ships that can go down the St Lawrence Sea Way is prohibitively expensive and then the trip would be longer than from Brazil. Shipping it in rail cars half way across the US to the West might even be cheaper, but still not completive. I am willing to learn I am all wrong on this, if you have data, but I seriously doubt there is anyway Minnesota's iron can compete with a large government subsidy. Joe American is being screwed enough by them already! Yes I agree China's pollution and water problems are serious - will shorten many lives and will probably get worse before they get better. I am old enough to remember when Pittsburg PA was the steel center of the USA. On a windless day the smog was so thick you could not see across a wide street where the "golden triangle” is now. Not the High-tech one now in NC by that same name. China has Chinese to spare, but have closed 3000 smaller coal mines in 2006 or 07 (I forget) They are rapidly building some of the most modern nuclear reactors in the world (some are "pebble bed" designs). I forget the number of "nukes" added each year, but it is on the order of one every month. They have completed the world's largest Dam (on time and under budget!) and are experts in this field - More than half of all the dams in construction are being built in either China or by Chinese in Africa. I seriously doubt their pollution will reach the level it had in Pittsburg about 60 years ago and we survived that. China will too. Water is a more serious and difficult problem. The Gobi desert is advancing to the East, swallowing some small cities already. Even in some of China’s major cities there are serious reductions in visibility due to the fine airborne dust. (There is a reason why Chinese usually have their mouth and nose covered - and it is rarely medical fear of disease.) China will build more than 100 large cities in the next two decades in effort, more centrally located inland. I do not know anything about their design, but bet they all have at least two water systems - one for washing your car, flushing the toilet and another with much higher cost for cooking & drinking. (They may not like to admit it, but they know "extolling the people" to conserve water etc. is vastly ineffective compared to good old capitalism's "make the clean water expensive.") Industry will be required to recycle also. Somehow the Chinese will solve their water problems with only modest extra cost, compared to Brazil, where no one uses brooms to clean the sidewalk. One of the things than has amazed me most about living in Brazil is how fanatic they are about washing the side walk - they use several bottles of detergent every day in the 8 high rise closed building complex I live in. It all ends of in the local river which is often covered for miles by an unbroken layer of foam. I suspect Brazil is now making that illegal as I have not seen a slightly brownish "white river" miles long recently. ------------- *China's domestic ore is less than 1/4 Fe2O3.) What is the purity of the Minnesota's iron range ore?
It is taconite - low quality ore left behind in the original boom, processed locally into high quality pellets of stuff with several advantages (uniformity, etc). Its use would be in specialty steel mills, new ones of advanced design, that have been built in the US. China is ordering steel from these mills. It's already worse, in places. And more difficult to deal with, for a variety of reasons including topography and dense populations.
That makes sense. For years I have been suggestion that Brazil ship steel to China and it seems they agree as the Chinese are building a new very large steel making plant here now. With higher quality ore, cheaper labor and shorter shipping distance it will still be hard to compete with Brazil but high value per ton speciality steel is possible. Things like medical instruments etc would be even better.
What I have been stating for years is same as: "... China has paid heavily for this relationship. {China buying T-bills instead of investing in China.} Rather than invest its surplus cash in its own country, the Chinese poured money back into the U.S. to further spur our debt-fueled consumption.* (Put less artfully, some poor Chinese guy in Shaanxi province was essentially helping you pay your mortgage.) The announced stimulus package reverses that. Hundreds of billions of dollars that would have gone to propping up the greenback are now being reinvested in China, helping it to transition from its reliance on exports to a self-sustaining economy. So while China isn't yet decoupled from its export markets, this new spending plan will help it along that path. {When is is nearly complete China will say: US, Go to hell. - And the US will, as not able to even pay the interest on the US debt except by printing press dolllars. And interest rate will be much higher without cheap loans from China.} China's huge currency reserves are about to be put to use, and while there will be some real and perhaps severe bumps along the way, the China that comes out on the other side will be a heck of a lot stronger, more independent, and more decoupled than the one we've seen up to now. ... we do know that China's ability to reach deep into its huge coffers to finance further growth gives it a significant advantage over the rest of the world's struggling economies. This is why we continue to believe in the Chinese miracle, ..." FROM: http://www.fool.com/investing/inter...inas-stimulus-plan-will-change-the-world.aspx With bold added by Billy T and {text inserts} Not good news, but US will collapse if China stops buying and holding T-bills. It is premature for China to do that now, but it could and only be mildly hurt. By switching to produce for that internal market (and pay its suppliers of energy, food stocks and raw materails) China can "decouple." As article wisely notes, this world's largest simulus plan is the first step of that switch. Their domestic market is huge. For example, only 3% of the Chinese own a car. In US there is one for every licensed driver! --------------------- *The surest way to kill your enemy is to feed him unlimited sweets he can not resist.
In this thread, more than a year (or two?) ago, I explained that the cause for China surpassing the US would have more to do with the decline of the US (negative GDP growth) than the double digit growth of China, but I failed to anticipate another factor: China can and may buy the productive parts of the US and move them to China (or at least turn them into captive suppliers). While no-one want to buy Ford, Chrysler or GM, it seem that China is interested in buying GE because of Chinese power shortages (Even with a new power plant coming on line every 8 days generation capacity is not growing rapidly enough to keep up with China's amazing growth!) See today's Bloomberg article which contains: "... General Electric Co., down 61 percent this year in New York, is seeking funds from China Investment Corp., Government of Singapore Investment Corp. and at least two other sovereign-wealth funds. Talks are also being held with Temasek Holdings Pte of Singapore and China Safe Investments Ltd., Brussels-based spokeswoman Elma Peters said in a phone interview today. China Investment Corp. is the nation's $200 billion sovereign wealth fund. ... Asia has attracted global engineering companies, including Siemens AG of Germany* and Alstom SA of France, as governments build-out power networks and infrastructure. China plans to spend almost $150 billion over five years to bolster networks after power demand outstripped capacity, causing blackouts. ..." From:http://www.bloomberg.com/apps/news?pid=20601087&sid=a153B3hygt34&refer=home ------------------- *I am not sure, but think they helped design the world’s only magnetic levitated train in actual routine commercial service for several years now.
