11-12-2008, 04:40 AM
<b>China's Bazooka Beats Henry Paulson's Peashooter: William Pesek </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>China's bazooka is proving to pack more firepower among economists. Yet will spending a fifth of gross domestic product to prop up growth work? Not necessarily. Asia should curb its enthusiasm about China's ability to shield the nation's 1.3 billion people from a global slump</b>.
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<b><span style='color:red'>It's far from clear that China has the domestic wherewithal to keep growth as close to 10 percent as Communist Party bigwigs would like. Economists generally see 10 percent as what's needed to produce enough jobs to keep living standards rising and to maintain social stability.</b></span>
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External Influences
No one doubts China's financial resources. <b>It has about $2 trillion of currency reserves </b>to lavish on low-rent housing and roads, railways and airports, and tax deductions for purchases of fixed assets such as machinery. It has banks, even the publicly traded ones, at its disposal to plug any economic holes that suddenly appear.
Yet the external picture matters more. <b>China relies heavily on exports to produce growth. Anyone who doubts that need only look at how quickly the government's focus has gone from inflation to deflation.</b>
Data released yesterday show why. <b>China reported the slowest export growth in four months in October, while inflation cooled to the slowest pace in 17 months</b>.
``As the contribution of trade to China's growth dissipates, we expect further measures to be introduced aimed at stimulating consumption and investment in the domestic economy,'' says Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. in Hong Kong.
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Collision Course
The trouble is, such plans must be financed. <b>That could prompt China to sell hundreds of billions of dollars of U.S. Treasury and agency securities, or at least slow its purchases. The result would be sharply higher U.S. rates.</b>
<span style='color:red'><b>``China's need for money will collide with the ramp-up of U.S. borrowing, expected to be between $1.5 trillion and $2 trillion because of the massive U.S. budget deficit,''</b></span> Tony Crescenzi, chief bond strategist at Miller Tabak & Co. in New York, wrote in a note to clients.
It raises questions about whether the U.S. can really borrow its way out of this crisis, John Maynard Keynes-style
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Bigger Bazooka
The emphasis on boosting growth with new roads, bridges and dams is questionable, too. <b>Such projects didn't enliven growth </b>as much as advertised in the 30 years since China's economic- modernization process began. <b>What propelled growth to recent heights was trade, particularly China's succession into the World Trade Organization in 2001</b>
<!--QuoteEnd--><!--QuoteEEnd-->
This is what I am saying for few months.
China collapse may be very dramatic, may be like Argentina. China need US for its product, well US is borrowing like pampered bribe.
....
<b><span style='color:red'>It's far from clear that China has the domestic wherewithal to keep growth as close to 10 percent as Communist Party bigwigs would like. Economists generally see 10 percent as what's needed to produce enough jobs to keep living standards rising and to maintain social stability.</b></span>
....
External Influences
No one doubts China's financial resources. <b>It has about $2 trillion of currency reserves </b>to lavish on low-rent housing and roads, railways and airports, and tax deductions for purchases of fixed assets such as machinery. It has banks, even the publicly traded ones, at its disposal to plug any economic holes that suddenly appear.
Yet the external picture matters more. <b>China relies heavily on exports to produce growth. Anyone who doubts that need only look at how quickly the government's focus has gone from inflation to deflation.</b>
Data released yesterday show why. <b>China reported the slowest export growth in four months in October, while inflation cooled to the slowest pace in 17 months</b>.
``As the contribution of trade to China's growth dissipates, we expect further measures to be introduced aimed at stimulating consumption and investment in the domestic economy,'' says Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. in Hong Kong.
...
Collision Course
The trouble is, such plans must be financed. <b>That could prompt China to sell hundreds of billions of dollars of U.S. Treasury and agency securities, or at least slow its purchases. The result would be sharply higher U.S. rates.</b>
<span style='color:red'><b>``China's need for money will collide with the ramp-up of U.S. borrowing, expected to be between $1.5 trillion and $2 trillion because of the massive U.S. budget deficit,''</b></span> Tony Crescenzi, chief bond strategist at Miller Tabak & Co. in New York, wrote in a note to clients.
It raises questions about whether the U.S. can really borrow its way out of this crisis, John Maynard Keynes-style
...........
Bigger Bazooka
The emphasis on boosting growth with new roads, bridges and dams is questionable, too. <b>Such projects didn't enliven growth </b>as much as advertised in the 30 years since China's economic- modernization process began. <b>What propelled growth to recent heights was trade, particularly China's succession into the World Trade Organization in 2001</b>
<!--QuoteEnd--><!--QuoteEEnd-->
This is what I am saying for few months.
China collapse may be very dramatic, may be like Argentina. China need US for its product, well US is borrowing like pampered bribe.