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 The daily drum beating of Chinese economy overheating - copied. |
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Jimmy
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游客
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作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
- 'china's economy is overheating' has been over-subscribed in the western media these days. they have beening wanting to hear that chinese economy is 'finally' falling apart for a very long time.
but the fact of the matter is that we are only talking about the start of a wave of excessive duplicative investment in heavy industries and real estate, and 3 - 4% inflation over the past half a year, hardly anything to lose sleep on by western standards. even if any of the excess eventually is to develop into a burstable bubble, we are still talking about the distant future, maybe in a few years. and the chinese government is not exactly sitting on its collective hands either.
- the 1st quarter stats are certainly as awesome as ever: 9.7% DGP growth, 30+ to 40+% growth in export and import trade, 20+% in industrial output, 19+% growth in M1 and M2 money supplies, 20+% growth in tax collection, etc. even if there is a problem of 'overheating', and even if the government is not doing anything, the natural increase in commodity, raw material, and utility prices will by themselves eventually restrain the demand and cool things down.
for example, a lot of steel, aluminum, copper, electric generation, construction, etc. projects have been curtailed simply because the rising raw material cost has diminished the return on the investment.
the government is indeed doing something: it upped the bank reserve requirement by 0.5% twice in a quick succession, taking out a lot of liquidity from the lending supply, thus forcing the industry to make the hard choice of putting the limited money available on the few projects that make the most sense.
- we are talking about a new era of hyper growth --- the domestic demand, not export, by the newly affluent chinese people is the earth shaking story literally. this demand is pushing up the greatest expansion of capital and technology extensive heavy industries that the mankind has ever faced with, and even in this very early stage of this expansion it already has pushed the world raw material and transportation capacity to the eyeball.
the so-called 'over investment' is really a misnomer. if you take a closer look, china's problem is not 'over supply' but inadequate supply. from utility to transportation capacity to fuel to petrochemical to aluminum to may other things, the supply is just falling far short of the demand. some of the short falls have created an unprecedented bonanza for rest of the world, but the real story that is shaking the world is the magnitude of heavy-industry capacity china is rushing to build to meet this demand --- and indeed when and if china has enough capacity, the world as a whole may well have 'over supply'.
there is no doubt china's demand will continue to drive up raw material prices around the world, and there is no doubt china's development will continue to drive down the prices of finished goods, in either case there will be enormous challenges for the rest of the world. the forces that drive china today is simply too great, so the whole world will have to adjust and adapt over the coming years, if not the coming decades.
- china is running an $8.4 billion trade deficit over Q1 this year. this is primarily the result of the increased demand, in particular demand for oil, raw material, and other commodity, as well as the result of government's deficit spending plus the ever growing influx of FDI.
the forex reserve continued to skyrocket to about $440 billion by the end of march.
premier wen's assessment that the exchange rate is 'compatible with china's current economic situations' is seen quite compelling.
for china's current circumstances, there is no chance for it to float its exchange rate for at least another half a decade, and it makes no sense even to talk about this issue at this point (so why the daily drum beat in the west?). a one-off revaluation of the yuan is possible but not probable.
at this point, the government may have talked as though the economy is in a tough shape, but the reality is far less urgent. the PBoC has not even reached the stage of increasing the interest rate yet.
- in other words, china's economy is just swell, maybe a bit too good. anyone wishing something out of this 'overheating' is bound to be disappointed.
作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 The daily drum beating of Chinese economy overheating - copied. -- Jimmy - (4327 Byte) 2004-4-25 周日, 18:46 (781 reads)
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