The Great Fall of China
By BJ
The great economic engine of China is starting to grind to a halt.
For decades, the steamy Pearl River Delta area of southern Guangdong Province served as a primary engine for China’s astounding economic growth. But an export slowdown that began earlier this year and that has been magnified by the global financial crisis of recent months is contributing to the shutdown of tens of thousands of small and mid-size factories here and in other coastal regions, forcing laborers to scramble for other jobs or return home to the countryside.
Furthermore, the slowdown inhibits China’s ability to work with other nations in alleviating the worldwide crisis.
The Pearl River Delta, known as the world’s factory, powered an export industry that pushed China’s annual growth rate into the double digits and provided work for migrants from interior provinces with poor farmland. But circumstances have changed quickly. The slowdown in exports contributed to the closing of at least 67,000 factories across China in the first half of the year, according to government statistics. Labor disputes and protests over lost back wages have surged, igniting fear in local officials.
The fuel for China’s economic growth, as it has been for many other nations, has been the appetite of the American consumer, and those consumers are tightening their belts.
Retail sales and prices of goods imported to the U.S. dropped by the most on record, signaling the economy may be in its worst slump in decades.
Purchases fell 2.8 percent in October, the fourth straight decline, the Commerce Department said today in Washington. Labor Department figures showed import prices dropped 4.7 percent, pointing to a rising danger of deflation, and a private report said consumer confidence this month remained near the lowest level since 1980.
. . .
Retailers have now logged the longest string of monthly declines since the Commerce Department's comparable data series began in 1992. Excluding automobiles, purchases decreased 2.2 percent, almost twice as much as the 1.2 percent decline anticipated and also the worst performance on record.
Declines were broad based as furniture, electronics, clothing and department stores all showed loses.
Demand at automobile dealerships and parts stores plunged 5.5 percent after falling 4.8 percent in September.
Car sales are among the most affected as banks make it harder to borrow.
Little wonder the Big 3 are looking for bailouts.
However bad this economic slowdown is going to be for North America, the consequences in China are likely to be far worse. The ruling communist government has been able to maintain their grip on power in large part by providing the promise of greater and continuing prosperity to more and more of its citizens. Basically, so long as it ain’t broke, you don’t need to send tanks to Tiananmen Square to fix it.
An economic slowdown means people start thinking about changing their leadership, in China just like everywhere else, and China’s rulers are understandably worried. Places like Tibet and East Turkmenistan are already volatile, and several other regions where prosperity never reached, and where it is about to go into retreat, are likely to start agitating themselves.
A China without (relatively) rich foreign customers is a country on the brink of implosion. Definitely a place to keep an eye on.
From today's WaPo:
The patience of the regular old Chinese citizen is NOT infinite.
Posted by: HyperIon | November 14, 2008 at 08:14 PM