Posted on 07/02/2002 6:33:01 PM PDT by kattracks
China's sagging economy is threatening to turn China into an Asian version of Argentina, a top financial journal warns.
"Unless it can patch up the situation, China risks becoming Asia's Argentina... the people's Republic can go from boom to bust in just a few short years," wrote Gordon Chang in the June 19, Asian Wall Street Journal as quoted by the authoritative American Foreign Policy Council.
According to Chang, both countries crammed their banks full of bonds, created growth by playing money games and attracting foreign direct investment... "Argentina," he wrote "deferred reforms by living on foreign capital, and China is playing this same game, too... When the flow of international capital tightens again, China's deteriorating fiscal and debt conditions will come under international scrutiny."
High expectations for the Chinese economy are "grossly exaggerated" he warned, explaining that China's economic growth is declining and its banking system is "disarray, posing a threat of destabilization to the international economy. .
Chang reported that Beijing authorities describe China's economic outlook with words such as 'grim' and 'grave,' yet some foreign experts are continuing to say that everything is just fine and dandy in the People's Republic of China.
He cited the official figures - which he said tend to exaggerate China's output yet still show growth declined in each quarter of last year... "There is also a more fundamental matter of how could a country record high growth when it is experiencing worsening deflation and massive unemployment."
Signs of China's economic problems described by Chang:
- The central government amounts for more than two-thirds of investment in the country, which he says is alarming by any standard;
- China's ever-larger budget deficits as shown by the record one of $37.5 billion announced for the coming year
- China's annual deficit has already zoomed past 3% of the GDP, the international recognized safety limit.
"The current pace is unsustainable and out of control," he wrote. "Finance Minister Xiang Huaicheng has just one word for China's recent spending, calling it 'reckless.'"
"China as the next Argentina?' he asks, adding that even though it sounds preposterous today, "it is worth remembering that Argentina did not have to go through the shock therapy of joining the World Trade Organization which resulted in China's losing control of the timetable to reform its banking system.
"The largest state banks are insolvent, as a group perhaps the weakest in the world," he reports, adding that Beijing must either rehabilitate them in the next five years to the tune of $500 billion - or face the failure and the collapse of the economy itself."
"Beijing talks a lot about structural reform but has implemented very little of it these past few years," Chang concludes.
"In this upcoming period of political transition, [with jockeying for the upcoming Communist Party leadership changes at hand]the paralysis will become even more evident... The critical issue is time. Peasants and workers are impatient... Despite progress, many Chinese today are hungry, angry and, worst of all, desperate. Beijing's leaders know how to use the coercive power of the state to keep a lid on unrest. Yet, force is only a short-term solution. Time is running out."
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Good, maybe we can buy back OUR Panama Canal...
Eh, I don't know....they do have rather long periods of highly-centralized and controlled government. But when they do have their periodic civil wars (and they're gonna be getting about due in a decade or two) they're 10 times bloodier and more complicated than anyone else's.
The Chinese civil war is coming. It is only a matter of when. If Taiwan plays its cards right, it may secure southern coastal China during the chaos. They can create a federation of sorts. There is another potential economic trouble spot, that is, Japan. I think that US could also be in trouble for some time. Potential triple blows, in sequence or unison. All those China/Wall St. cheerleaders who showed up in business media, what should we do about them ? Don't say nothing. :)
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