Thursday, February 2, 2012

China crash ahead

China Economy Heading for ‘Hard Landing’ as Exports Decline, Shilling Says

China’s economy is headed for a“hard landing” this year as weaker demand overseas chokes off exports, said Gary Shilling, who correctly forecast the U.S. recession that began in December 2007.
A Chinese government report yesterday showed that export orders fell last month even as manufacturing expanded. The Shanghai Composite Index (SHCOMP) dropped 1.1 percent yesterday as stronger manufacturing boosted concern that the world’s second-largest economy will decelerate further as the government refrains from loosening monetary policy to tame inflation and curb property prices.
Comment: A crash of China is only a matter of time. State capitalism does work well for a while but at the cost of ever larger distortions of the capital structure. Then it only takes a minor event and the structure will collapse. This has happened before in many countries and will happen this time with China. Whether iChinas economy will crash this year, as Shilling says, or the next year, I don't know. Yet what I do know based on theory and history is that China's economy will crash anytime soon. The fragility of the capital structure of China's economy is unable to resist any significant shock.
Maybe the big surprise on 2012 will be a strong recovery in Europe and the US while the emerging state capitalist countries such as particularly China and Brasil experience their unexpected armageddon.

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