Friday, August 07, 2009

China: The Good News Is ...

Today is Friday, 7 August 2009.

A very disturbing article in today’s The New York Times reports that banks in China, acting on government instructions, set a record for January to June lending: $1.1 trillion.

Most loans went to state infrastructure projects and large government-owned enterprises. These are precisely the types of loans which have been historically plagued by high levels of graft and embezzlement.

State financial corruption has been endemic in China for decades, even though major culprits are regularly executed. (Just today, the BBC reported the execution of the former head of Capital Airports Holdings, which owns 30 airports, including Beijing’s. He’d been convicted of stealing $12 million from public coffers and accepting $4 million in bribes.)

Dumping the trillion dollars into the Chinese economy did succeed in keeping up the pace of growth of the economy, at 7.1% for January to June. (It’s generally accepted that China’s economy must grow by a minimum of 6-8% a year in order to merely keep pace with the growing population and increasing hunger for consumer goods, and thus containing social unrest within manageable levels.)

Historically, Chinese government policies have favored investment in and growth of export-oriented production, and not production for domestic consumption. With the world mired in the worst recession since 1945, it’s increasingly difficult to see how this model can be maintained over the long term, or even the middle term.

Widespread social dissatisfaction, turmoil, and even rebellion would not be good news in a country of 1.3 billion people, for the world and particularly for the Chinese people. It would also be very bad karma for the USA/USE, given the American addiction to financing domestic consumption by borrowing from China.

The good news: the Chinese leadership has staved off immediate disaster. The bad news: the Chinese leadership suffers from the same economic lunacy as American ride-the-market-into-hell yoyos.

Complete article is well worth reading at:

On this date in 1964, Congress passed the "Gulf of Tonkin Resolution", stampeded by false information provided by the Johnson regime, and leading to the massive escalation of the Indochina War, and millions of needless deaths.


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