herefore, putting together the negative and positive ramifications for the Chinese economy, it is easy to conclude that China’s financial and real estate troubles are real. The manufacturing economy, although linked to consumers in the West, will chug it along. This is the best that the Chinese can hope for.
Unexpectedly, the United States may see an opportunity to press China to revise its currency, which has stayed largely undervalued. This is not a pretty picture for China.
Additional concerns arise when one notes that in an average good year prior to 2009, 20 percent of China’s bank loans went sour. In contrast, average bad bank loans elsewhere in the world were 2 percent. With huge bank disbursements in 2009, mostly to unsavory but well-connected people, China’s bad loan position may jump to 30-40 percent. So no matter how one looks at it, China’s financial markets are headed for trouble.
China’s manufacturing economy will soon face problems of its own. It was in 1979 that Chinese leader Deng Xiaoping instituted a one-child policy that won accolades in the West. Since then, the population base is growing old. The manufacturing sector will have trouble replacing old retiring workers with young ones.
Also, smartly educated youngsters may not opt for factory jobs, preferring office jobs or high-end technical jobs. There is no dearth of labor in China to run assembly lines or work on simple construction projects. But a major production disruption is possible if nobody wants to work on these jobs.
Big troubles are forecast for the Chinese economy in the near term and it is all because it is trying to outdo the West. If trouble strikes, it is the West that will gain.
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