03-09-2009, 08:55 AM
<b>Chinaâs 2009 Rebound Is Pure Fantasy: William Pesek </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Here are five reasons a Chinese rebound in 2009 may not pan out:
1. <b>World growth is collapsing</b>. This isnât hyperbole, but a sobering fact. The International Monetary Fund canât downgrade its global growth estimates fast enough as the credit crisis overwhelms economies as diverse as Ireland, Japan, the United Arab Emirates and the U.S.
Asian governments are increasing spending to soften the blow from falling asset prices, consumer spending and manufacturing. The European Central Bank is struggling to keep up with the regionâs plunging economy.
The trillions of dollars of wealth being lost as markets plummet are depleting public coffers and damaging consumer psychology. Itâs not a good environment for any government hoping for a revival in global demand.
<b>2. Chinaâs key customer is in hiding, indefinitely.</b> Just when you thought conditions in the $14 trillion U.S. economy couldnât get any worse, they âdeteriorated furtherâ in almost all corners of the country over the last two months, the Federal Reserve said in its regional business survey.
Wang Hanmin, a sales manager at Yixing Bochangyuan Garments Co. in Jiangsu province, spoke for many this week when he said exporters are facing a âlife and deathâ crisis. Exporters are so worried that they are calling on the government to weaken the yuan after the biggest slump in overseas sales in more than a decade.
One thing is for sure: The U.S. consumer isnât about to help China out of this dilemma.
<b>3. A lack of tools.</b> Itâs important to remember that the 4 trillion yuan ($585 billion) spending plan unveiled in November was more spin than reality. Much of it wasnât new, but a tally of existing spending efforts. They were never going to boost a $3.3 trillion economy anyway.
Chinaâs almost $2 trillion of currency reserves would seem to give the nation considerable policy latitude. Yet Chinaâs vast economy lacks the financial infrastructure to get the bang it needs from its stimulus in yuan. Would building more roads, bridges and dams do the trick?
âEight percent GDP doesnât really tell you anything about job creation,â says Stephen Green, Shanghai-based head of research for China at Standard Chartered Plc. âMany of these projects are not particularly job-intensive.â
The spending will help, but such projects didnât propel growth as hoped over the last 30 years. Exports did.
<b>4. All those U.S. Treasuries</b>. Financing loads of new projects could prove dicey, even for cash-rich China. Any move to draw down $696 billion of U.S. government debt could leave China with major losses and prolong the U.S. recession.
That leaves domestic lending institutions. If China wants to avoid a Japan-like bad-loan crisis, or something far worse, it has to be careful about massive public-works projects with questionable economic benefits.
Of course, thereâs the âofficialâ gross-domestic-product figure, and then thereâs the real situation in the most populous nation. The double-digit drops in exports among Chinaâs biggest trading partners in Asia show how bad things are getting. Offsetting those trends wonât be easy and it wonât be cheap.
<b>5. Rebalancing takes time.</b> Just as the U.S. needs to become a nation of savers, China needs more consumers. Thatâs a destabilizing, decade-long process that requires the creation of national safety nets and more education and health-care spending
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1. <b>World growth is collapsing</b>. This isnât hyperbole, but a sobering fact. The International Monetary Fund canât downgrade its global growth estimates fast enough as the credit crisis overwhelms economies as diverse as Ireland, Japan, the United Arab Emirates and the U.S.
Asian governments are increasing spending to soften the blow from falling asset prices, consumer spending and manufacturing. The European Central Bank is struggling to keep up with the regionâs plunging economy.
The trillions of dollars of wealth being lost as markets plummet are depleting public coffers and damaging consumer psychology. Itâs not a good environment for any government hoping for a revival in global demand.
<b>2. Chinaâs key customer is in hiding, indefinitely.</b> Just when you thought conditions in the $14 trillion U.S. economy couldnât get any worse, they âdeteriorated furtherâ in almost all corners of the country over the last two months, the Federal Reserve said in its regional business survey.
Wang Hanmin, a sales manager at Yixing Bochangyuan Garments Co. in Jiangsu province, spoke for many this week when he said exporters are facing a âlife and deathâ crisis. Exporters are so worried that they are calling on the government to weaken the yuan after the biggest slump in overseas sales in more than a decade.
One thing is for sure: The U.S. consumer isnât about to help China out of this dilemma.
<b>3. A lack of tools.</b> Itâs important to remember that the 4 trillion yuan ($585 billion) spending plan unveiled in November was more spin than reality. Much of it wasnât new, but a tally of existing spending efforts. They were never going to boost a $3.3 trillion economy anyway.
Chinaâs almost $2 trillion of currency reserves would seem to give the nation considerable policy latitude. Yet Chinaâs vast economy lacks the financial infrastructure to get the bang it needs from its stimulus in yuan. Would building more roads, bridges and dams do the trick?
âEight percent GDP doesnât really tell you anything about job creation,â says Stephen Green, Shanghai-based head of research for China at Standard Chartered Plc. âMany of these projects are not particularly job-intensive.â
The spending will help, but such projects didnât propel growth as hoped over the last 30 years. Exports did.
<b>4. All those U.S. Treasuries</b>. Financing loads of new projects could prove dicey, even for cash-rich China. Any move to draw down $696 billion of U.S. government debt could leave China with major losses and prolong the U.S. recession.
That leaves domestic lending institutions. If China wants to avoid a Japan-like bad-loan crisis, or something far worse, it has to be careful about massive public-works projects with questionable economic benefits.
Of course, thereâs the âofficialâ gross-domestic-product figure, and then thereâs the real situation in the most populous nation. The double-digit drops in exports among Chinaâs biggest trading partners in Asia show how bad things are getting. Offsetting those trends wonât be easy and it wonât be cheap.
<b>5. Rebalancing takes time.</b> Just as the U.S. needs to become a nation of savers, China needs more consumers. Thatâs a destabilizing, decade-long process that requires the creation of national safety nets and more education and health-care spending
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