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Generational Dynamics Web Log for 4-Jun-2011
4-Jun-11 News -- China's economy slowing, with possible worldwide consequences

Web Log - June, 2011

4-Jun-11 News -- China's economy slowing, with possible worldwide consequences

It's beginning to look like 2008 all over again

China's economy slowing, with possible worldwide consequences

I've often written that as bad as America's economy is, China's economy is in much more trouble. And now, after a week of extremely bad economic news in U.S. housing, manufacturing, and unemployment, it appears that China's economy is also showing signs of heading downward, with major consequences for the rest of the world.


Bird's Nest - Beijing Olympics stadium (Xinhua)
Bird's Nest - Beijing Olympics stadium (Xinhua)

International commodities markets are "starting to look a lot like 2008," according to Standard & Poor's analyst Scott Sprinzen, quoted by Bloomberg.

Recall that China's overheated economy was sucking up commodities early in 2008. But as the Beijing Olympics games approached in August, China's economy sank and China's commodities purchases fell. By the end of the year, trade and transportation had collapsed around the world, and the Baltic Dry Index (a measure of commodities shipping) had fallen an incredibly 95%. As I described it at the time, it was like the science fiction movie, "The Day the Earth Stood Still," except that it wasn't science fiction. (See "World wide transportation and trade sink farther into deep freeze.")

A slowdown in China's economy would have a similar effect today. Commodities prices could esily fall 25-40%, and might fall as much as 75%, according to Sprinzen.

And a slowdown IS occurring. Two surveys released Wednesday reveal that Chinese manufacturers expanded in May at their slowest pace in nine months, according to the Globe&Mail.

CBS Business News blogger Constantine von Hoffman has provided a list of some of the signs that China's economy is melting down:

America and China, two great civilizations that are almost completely foreign to one another, are now locked together, arm in arm, in a death spiral downward that will leave both countries, and all of their neighbors, completely devastated.

(Comments: For reader comments, questions and discussion, see the 4-Jun-11 News -- China's economy slowing, with possible worldwide consequences thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Jun-2011) Permanent Link
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