PBS: The Coming Collapse of The Chinese Economy

China has the factories to build what it needs. ie Pots, pans, diapers, cars, shirts, pants; so long as people need those things there will be jobs for those workers. The US is SOL when it comes to such simple jobs, except in agriculture.

China will take a hit if the US goes down but the factories will still be cranking out strollers and wallets.

 

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Probably even more important than the factories is their efficient social command and control system.* What the Chinese did after the earthquakes, in some cases by armies of men with only shovels, is amazing. - A very stark contrast to what the US response to Katrina was. When the US is in depression, most of the factories will still be there, but idle.
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* ARAIK, the only more efficient command and control system in the world is the Pope's.

Public consent, etc. is the enemy of efficiency. For example, the Chinese built what is by far the world's largest, and one of the most modern in baggage handling, crowd flow control, etc. airports in the world in much less time than England spent just on public hearings for a relatively minor expansion of Heathrow Airport, and that expansion, most agree, is poorly done. It all reminds me of the old: "A camel is a horse designed by a committee." joke.

 

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Sometimes it takes a new perspective to shine a new light on things, sometimes we don't need to fix what is no broken.

I can't blame them for trying but I can blame them for sticking with bad results.

 

The China "10%" is a heavily adjusted number while the Brazil "13%" numbers seems to be and unadjusted.

This source http://www.nationmaster.com/graph/eco_exp_pergdp-economy-exports-per-gdp calls China's exports 36% of GDP, Brazil's exports 13% of GDP and the USA's exports 8% of GDP.

Wikipedia http://en.wikipedia.org/wiki/Economy_of_the_People's_Republic_of_China backs up the Chinese numbers from Nation master but then makes the first adjustment of looking at how much larger China's GDP is in internal purchasing power rather than converting the Chinese GDP into dollars and then comparing it to other nationsGDPs without considering purchasing power.

From http://www.economist.com/finance/displaystory.cfm?story_id=10429271 "Jonathan Anderson, an economist at UBS, a bank, has tried to estimate exports in value-added terms by stripping out imported components, and then converting the remaining domestic content into value-added terms by subtracting inputs purchased from other domestic sectors. At first glance, that second step seems odd: surely the materials which exporters buy from the rest of the economy should be included in any assessment of the importance of exports? But if purchases of domestic inputs were left in for exporters, the same thing would need to be done for all other sectors. That would make the denominator for the export ratio much bigger than GDP.

Once these adjustments are made, Mr Anderson reckons that the "true" export share is just under 10% of GDP."



I can't tell whether Anderson's "10%" number for "China's exports as a percent of GDP" includes or does not include the purchasing power adjustment for GDP.

The Economist article goes on to discuss the multiplier effects. Part of China's GDP is created by investing in new facilities for exports. This part of the Chinese economy would be hurt by a slow down in exports.

I think we all understand how any cutback in any sector of the economy will have a rippling multiplier effect as the workers and suppliers for that sector reduce their spending as their income falls.

Then there is a question of the booms and busts that occur naturally with business cycles. How inflated was the domestic Chinese economic balloon? How much frothiness was there? How much damage could the pin prick of falling exports do to the Chinese economic balloon? Chinese Wall Street has already taken a whack but what is in store for Chinese Main Street? Wall Street is anticipatory and gets affected in advance even by things that were not even real, while Main Street is much more sluggish and takes longer to get to be affected by change.

 

No. It will shrink and taste reality.

As a fan of the Chinese people and, for the most part, China in general, I hope and think the market will correct, and then begin to grow again.

~String