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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Earlie who wrote (25336)	3/10/2005 7:31:19 PM
From: RealMuLan	Respond to of 116555

Earlie, Thanks a lot for your compliment, glad you find some of my post useful<g>. Actually, some Chinese economists/officials share your concern too. The unusual high dependency on foreign trade indeed puts China’s economy in great danger in case exports slow down. In early 1980s, foreign trade only counted about 15% of China’s GDP, it increased to 45% by 2000, 60% by 2003, and 70% by 2004. About 36% of all China’s GDP depends on exports in 2004. So the key for China is to stimulate the domestic demand and to acquire new market. And China has already realized this, and they are making great effort. It is true that the slow down in the US will translate into big job loss in China. But I think part of the deduction of the exports from China to the US (in case the US economy slows down) will be made up by the increase of the exports to other countries. There are three major factors in stimulating the domestic demand in China: control the housing price and increase the economic housing, control the educational cost and control the medical care cost. Many people in cities can save plenty, and they would also like to consume. But those three major expenses, or potential expenses, forces them to put money in banks or under the mattresses instead of spending. I was more pessimistic before last year about China, but now I think the current Chinese leaders have been doing some right things. So the sustainable growth in China (7% or so on average) for another 2-3 decades without major interruption is still a possibility. Yes, China basically follows the Western model of development, so it could not avoid the economic cycle. But since the world has never had an economy involved such a big population and blending both command and market economy together, so no one knows whether the usual pattern and length of a cycle will hold in China or not. Maybe, just maybe, the cycle in China can last much longer than that of a country which has much smaller population and which has a laissez-faire economic policy. Yes, it is a big "maybe", but it is a possibility. The earliest time for a hard landing in China will be, in my opinion, after 2008 Olympic Game, or maybe even after 2009 Shanghai World Expo. China can be very resilient. The world will be amazed<g>. And China has not even developed its personal credit market yet. Only very small percentage of Chinese now use credit card or have personal debt, and those who do have debt are housing loans, and some car loan. So if Chinese gov. really wants to prop up the economy growth, it can start to lend to individual for regular consuming. That alone can last the cycle for a couple of years<g> Earlie, you have been in this field for so long, so you definitely see, hear, and know more than I do. So maybe you are right in predicting China will have a hard landing (like Jimmy Rogers, and Marc Fiber<g>). I guess we will wait and see<g> Best.