China Owns Up to Recession

[marmar]

from 24/7WallStreet:



China Owns Up to Recession
Posted: November 21, 2011 at 6:05 am


China must have seen a prolonged recession coming from far off. Its export business has dropped. Chinese government figures are considered unreliable, and some experts say they paint the picture the central government wants painted. The real picture is that the global economy’s decline has steepened and will get worse. China will prepare to keep its GDP growing, probably through stimulus. It also will be less likely to put money overseas where it sees rising trouble.

“Right now the global economic situation is extremely serious and in a time of uncertainty the only thing we can be certain of is that the world economic recession caused by the international crisis will last a long time,” said Wang Qishan, a Chinese vice-premier. He added that China will have to take action against the threat, which means several things.

First it means that China’s rising consumer class will not take up the slack of export declines. The number of people in this demographic segment has grown by millions per year. More and more Chinese have moved from rural areas to the huge factory cities inland in the People’s Republic. These people have seen their wages rise sharply, which has prompted sharp increases in demand for everything from residential real estate to cars. Wang seems to say that this new consumer class cannot carry the nation’s economic growth as it has for the past several years.

Layoffs and slow wage growth probably will hurt these new consumers. This will further undermine their purchasing power. And it will cause more unrest among workers who have watched factory output grow, at least until recently, and who want to be compensated for the success of the companies they work for. These workers face a problem: their costs of living have been pushed higher by their lifestyles in urban areas, as well as by inflation that has taken the cost of goods, especially food, higher. ..............(more)

The complete piece is at: http://247wallst.com/2011/11/21/china-owns-up-to-recession/#ixzz1eLiLMxtR

[Javaman]

1. Meh, when their primary junky buys less of their crack...

is it any mystery why they are now having problems?

[Ghost Dog]

2. I would expect China government to intervene in the housing market,

mandating price-controls on certain types of housing in certain areas where demographic processes demand and where planning requires social market intervention. They could stimulate wage rises too. The plan has to be to encourage domestic consumption at this stage in the game.