October 3, 2008

BUT SMAUG IS INVINCIBLE...:

China's Economy Sputters: The property market is tanking, stocks are off 60%, and factory orders have fallen for three months in a row (Frederik Balfour, 10/03/08, Business Week)

While the fall in new orders in August could be attributed to the Olympics, when some industrial activity was curtailed, they did not rebound in September as many economists had expected. "We are seeing simultaneously the beginnings of an export slowdown and some weakness in business capital spending," says Eric Fishwick, head of economic research at Hong Kong investment bank CLSA Capital Markets. "It will get worse before it gets better."

CLSA predicts GDP growth will slow to 7.9% next year, down from a forecast 9.5% this year, and 11.4% in 2007. Achieving 8%, however, will require a concerted effort by Beijing to goose the economy. Indeed, the net export contribution to nominal growth has been negative since the beginning of the year. In August exports fell 2% year on year, and September is unlikely to look any better.

Coastal areas that rely more heavily on exports have been hardest hit. Nowhere is this more apparent than in Guangdong, which for years was the head of China's economic dragon. Thousands of factories have been shuttered as companies move to lower-cost areas inland and elsewhere in Southeast Asia, and the region could become China's next rust belt if things continue.


Unlike China, Japan had become wealthy before it began declining.

Posted by Orrin Judd at October 3, 2008 7:45 AM
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