China's latest worry: a local-debt mess

SHANGHAI (Reuters) - Shanghai unveils a $2.2 billion airport terminal on Tuesday, connected to the center of China's commercial hub by one of several new metro lines being built for the World Expo that opens in May.

The old terminal at Hongqiao airport, which mainly handles domestic flights, is hopelessly congested. A good case can also be made for a lot of the roads, railways and other transport links being forged thanks to the investment package that Beijing launched in November 2008 to see the economy through the global credit crunch.

But investors are focusing on a darker side of China's relentless investment: vast sums borrowed by local governments and plowed, skeptics fear, into white elephant projects that will never pay for themselves. A financial reckoning is not a question of if, but when, they say.

"Build it and they will come" must be the motto of the city fathers, for Kangbashi's broad boulevards and plazas are all but deserted, visitors say. Media reports describe similar ghost towns dotted around China.

As much as we worry about China, they certainly have plenty of their own problems to worry about. The Chinese Bubble is in full swing. It is funny how some liberals trying blaming bubbles on the lack of regulation, you would think that believers of Keynesian economics would agree that bubbles are inevitable during equity booms when spending becomes self perpetuating. It is a time of Irrational Exuberance that will inevitably lead to Extreme Pessimism. The ebb and flow of the economic cycle.

The problem is that the formula in play before this inevitable correction and deflationary spiral.

Remember, Hitler didn’t come about until AFTER the Great Depression.

Look at China, they have a one party system that could be desperate to retain power in unstable times, there is resource scarcity amidst a burgeoning population, their military is growing leaps and bounds, the internet and media are highly regulated, they have an intensely Nationalistic and relatively monochromatic and conformist society and there is an excess of over 100 million young men that are chronically unemployed.

This isn’t a good formula if something bad is added in as the Wild Card, whether it is a famine, economic crisis, protests or terrorism, a systematic crisis could turn China into even more of a militarized Police State Nationalistic Socialist country.

I have always tried not be a protectionist, but I am starting to lean toward the idea that we are only help these dictators and Free Trade is impossible without Free People.

Our idealistic wishes of China liberalizing after joining the WTO maybe impossible. Maybe the same lesson that Goggle has learned will eventually be realized. They hoped that they would be able to reach more Chinese citizens, but what if their entry into China has only helped the regime control people? They may be leaving China because they are breaking their motto of “Don’t Be Evil.”

"Remember that this is all one big Party. The Chinese Communist Party controls all of the nation's banks, and all of the local governments."

Commies do not believe in profit, so they have no reason to figger it in domestic planning.

Commies don't believe in banks or anything else capitalistic. They, and The Obammunist,. would just a soon print money it if it got a city for 1 million built. In the "You Tube" video on the ghost town Kangbashi City, supposedly, investors said, "Real estate is a good investment. We can afford to wait."

The Red Chinese do not have a convertible currency. They must retain trillions of foreign reserves so they can conduct foreign trade in renminbis. Inside Communist China, the paper money is "yuan".

yitbos

"Have to at least credit China with accepting the idea, that getting rich is a grand thing. "

Can't complain about Americans getting rich off communist slaves. Heck, there are enough of them that, if they wanted to, they could get rid of their masters.

Just so we keep our eye on those bastards and get rid of our own Commies.

yitbos

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