LA Times article on China and its economy:
latimes.com
Excerpts:
To ward off economic and social crises, Beijing is reverting to old habits of the command economy: government-mandated loans to state-owned enterprises, price controls on staple goods and tighter rules on foreign exchange and investment.
"This is a sign of desperation," says Chi Lo, Hongkong & Shanghai Bank's director of research on China.
...
"Without stimulating domestic demand, the GDP growth rate would not be 8%," Li says. "It would be just 4% or 5%."
That would still be the highest rate in Asia, and perhaps in the world. Yet, for China, it is not high enough to spin a social safety net as the command economy lurches closer to a market model. Since last year, the official unemployment rate has more than doubled, to 8%; the number of worker protests has risen along with the layoffs.
...
However, some of the growth is as empty as the new office towers in Shanghai. In this port city of 13 million, office space has risen nearly tenfold in the last four years and is still growing, according to research by the Shanghai office of First Pacific Davies, a Hong Kong-based property firm. In the next two years, more than 10 million square feet of new commercial space will hit the market.
Even though the vacancy rate here is nearly 50% and prices have been halved, cranes that had been idle for the last 18 months as infrastructure lending dried up have started moving now that credit has returned.
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As a result, some factories are rehiring laid-off workers and continuing to produce goods nobody wants. Inventories of unsold merchandise--from color televisions to internal combustion engines--have tripled in the past nine months and now make up 17% of China's GDP, Chi Lo of Hongkong & Shanghai Bank calculates.
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Conservative official estimates say that a quarter of the country's bank loans are bad--a rate higher than the bad debt levels in Thailand, Indonesia or South Korea before the Asian crisis broke last year.
Analysts say the actual rate may be closer to 40% or 50%.
Clark
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