Focus on China
November 10th
Chinese Laborers Face Grim Job Search
http://online.wsj.com/article/SB122627144171511961.html
“It’s very difficult to find jobs these days; people worry a lot about the future.”
-Li Wuhui, 28, Dongguan, China
Sound familiar? China’s slowdown is putting many Chinese industrial workers in a predicament that they thought would never happen. Bankruptcies and unemployment are steadily growing in south China, one of the country’s main manufacturing areas. Remember the toy paint scare earlier? This report mentions that half of China’s toy exporters that are tracked by China’s customs agency were driven out of the market the first seven months this year. Dongguan is known as the toy-making capital of the world. This slowdown is hurting many more than the toy makers, however. Decreases in electronics as well. The Chinese are also hurting from what American manufacturers are – rising energy and raw materials costs and sluggish sales. Remember that Americans are large consumers of Chinese goods and when our pockets tighten, China’s imports sit on shelves, unprofitable in the U.S.
Where are these manufacturing jobs going? According to the article – Vietnam, Cambodia, Bangladesh, and Mexico.
November 10th
China Sets Big Stimulus Plan In Bid to Jump-Start Growth
http://online.wsj.com/article/SB122623724868611327.html
“The announced sum of four trillion yuan represents about 16% of China’s economic output last year, and is roughly equal to the total of all central and local government spending in 2006.”
In case you don’t have a currency calculator handy, that sum is relatively equivalent to $586 billion USD. What I’m wondering is: Why this sum is significantly less for a country that has a much, much larger GDP than ours? Its actually quite scary to think at how much trouble America has really gotten into during the latest crisis. We’ve had a problem of exporting too little and importing too much for so many years. It’s really difficult to remember that we used to be a major exporter of raw materials (such as timber, oil, etc.) and durable goods. That is, up until the second half of the 20th century. Where has this trade deficit gotten us? Now we’re trying to essentially create money from nothing and jobs from no real durable goods. Yes, I know that we’re really not the agricultural or manufacturing giant that we once were – we’re now service and knowledge workers (Drucker), but what services are we really providing the world? Will the world pay for them as they’ve been doing? India is launching a rocket into space and due to U.S. working visa restrictions, we can’t allow enough highly technically trained Indians into this country to fill all of the available spots. Not to ramble too much, but I think that we really need to take a hard look at our educational system and make significant improvements. Not all of our children are going to be able have manufacturing jobs out of high school. Judging from the current state of our financial markets, they may not even be able to be investment bankers anymore!
November 12th
Weak China Data Show Why Beijing Acted Fast
http://online.wsj.com/article/SB122639642217517069.html
“China’s large trade surpluses were once seen as the result of a mighty export engine. But the increases in recent months, when export growth has been slowing, are more the result of a rapid deceleration in import purchases — a sign of domestic economic weakness, not strength.”
A couple things that I noted from this article:
China is a major exporter of oil and soybeans. I don’t know about many of our local farmers, but my uncle planted corn and my neighbors mostly planted soybeans. From my earlier article about the cost of farming leading to a major decline in one of the most profitable farming periods in American history, I found out that many U.S. farmers are looking to plant less corn and more beans (the latter being the least expensive, please let me know if I am misinformed).
I always believed that the reason China has such a booming GDP was due to the impact of its exports to the U.S. and other developed nations. I never really thought about it from the opposite angle – that of imports. If you look at it from both angles, with the GDP being the difference between imports and exports, you see that even though their GDP is growing, taking into account that the Chinese are also importing and consuming less, the GDP is therefore growing at a much slower rate than it looks at first glance.
I also see that we’re not the only ones feeling the housing crunch. I tend to think of China’s economy as somewhat impervious to the global crunch, but this article really opened my eyes to the fact that the global community is having many of the same problems. I didn’t really take into account that China might have a housing slump. According to the article, they experienced a 0.3% decline in property prices in October. This is one reason for passing their parallel bailout package as soon as they did.
It also looks as though China will be funneling money into public works and infrastructure projects, which to me echoes what FDR did during the Great Depression and what the U.S. government may be doing in our future to create new jobs.
November 14th
China’s 4% Fall in Electricity Output May Portend Worse Economic Slump
http://online.wsj.com/article/SB122660290165425119.html
“The 4% decline in power generation in October from a year earlier, announced Thursday by the National Bureau of Statistics, deepens what has become the most severe falloff in electricity output in a decade.”
This article points to more evidence of China’s growth slowing immensely. My previous articles this week on my sort of “Focus on China” feature has pointed to several factors that are strengthening the argument that China is starting to slump. Another statistic that this article points out is that the energy used to power manufacturing plants is slowing due to the exports slowing: Their government reported the weakest growth in manufacturing output in the past four years. China’s four largest banks disclosed plans today to increase lending to bolster the Chinese economy in addition to their proposed $586 billion stimulus package.
