Chinese statistics. They count GDP differently than we do - when budgeted or shipped, not spent or sold. Much of their apparent demand for commodities is stockpiling not production. It was not that hard to call the end of their secondary top last August. Maybe the problem lies in our fantasies about China, not our bitches about the US. Barry Ritzholz first laughed off the bogus Chinese stats, but now he is not so sure: “China expert Gordon G. Chang (author of The Coming Collapse of China) is more than skeptical — he has the data to question much of China’s growth miracle.” In sum, real stats like gasoline sales are flat, belying the claimed 8%+ growth.
The amount of stimulus by China is huge as a percent of GDP compared to the US, and they may not be getting that much for it. Those wistful Liberals may think it is ok to slosh around excess money, since it adds to an abstract “aggregate demand” and should help fill the gap of a drop in private consumption and investment. Where the excess ends up matters, however, especially if it lands in a whole passel of malinvestments, such as Ghost Cities being raised in China with nothing productive in them. Or, the US favorite for malinvestment, a horrific housing bubble, which may be emerging in China again. Eventually the piper has to be paid. Now the cracks have begun to form. The Bank of China is over-extended, giving it no safety net from a hiccup. The hangover from binge lending may apply to all the top Chinese banks. Their plans for bolstering their balance sheet sent Asian markets tumbling at the same time as Dubai defaulted. A continued weak Dollar would also undo the Chinese stimulus. Karl Denninger reports that a 10% drop in value of the dollar would reduce the value of reserves by 3x (Y1.5T) that China is spending on the stimulus (Y586B).
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