Telegraph – China has now become the biggest risk to the world economy
“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.
While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said.
By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – “stealing American jobs”, says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too.
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China is a command economy. They said to lend, so the banks lent.
There was overcapacity due to falling worldwide demand, but they lent, and builders built. Now there are see-through office towers and factories standing vacant.
You think OUR real estate bubble bursting was bad for the world economy, just wait till the Chinese consumer figures out he’s being had.
Yeah, I’ve been tempted to use “see through building” as a word of the day.
It’s not just onesie-twosie buildings, either. There are entire towns of buildings that are shiny new and sitting empty. No one actually wanted the buildings. Their construction was a make work project from the government.
And apparently Chinese buildings have a terrible reputation for construction quality. One large building collapsed not too long ago.
Did I mention the buildings are also incredibly expensive? A disaster waiting to happen.