China - Worse Than I Thought

I wrote last week that if China is not seeing its targeted 8% growth it is effectively in a recession. I did not explain it appropriately, so I got some less than positive comments. Well, as I understand it, their migration of workers from rural areas to urban factories and other businesses requires at least an 8% GDP growth rate to be maintained. Those that know better please feel free to comment. I only know what I have read.

Over the past few years they have had a GDP growth rate well into the double digits, which is well above the needed 8%. Now, they are at 6.8%, which is a quarterly growth rate base on YoY comparisons. Other countries, like the U.S., jude quarterly GDP basis on a quarter on quarter seasonally adjusted basis. Doing it this way for China would put their fourth quarter growth at virtually 0%. They could well be in a recession soon by our standard here, which is a complete disaster there. I am traveling there in a few months and will report more, but the odds of significant social unrest is increasing dramatically daily.

This is no small matter. This is a country with well over a billion people, with nuclear arms, with the third largest economy and with a host of problems. Their people for the most part started out with little to nothing so cutting that to any significant degree may lead to massive social issues. People should not starve and live without heat anywhere in this world. Those in the U.S. focus on the U.S. but we are all humans and we need to figure out a way to help other countries, despite our own dire straights. This will, by the way, pay off in spades in the long run, so do not be so short-sighted to consider this a bad idea. Think about it from the perspective of a citizen of China - "the U.S. did what they could to help us when they needed the money for themselves. Why would they do this?" This is not why I am recommending it, by the way. I do so because I believe it is the right thing to do, but having a political reason for it being the right thing does not hurt.

http://www.nakedcapitalism.com/2009/01/china-claims-68-economic-growth-for-4q.html

http://www.rgemonitor.com/roubini-monitor/255237/the_chinese_devil_wears_prada_why_0_growth_is_the_new_size_68

This to me is very problematic. We will see.

Disclosures: None