Comments on: Chinese Heavy Industry Slowing Down http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html Sun, 22 Nov 2009 15:00:24 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Hillary http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27280 Hillary Wed, 26 Nov 2008 17:20:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27280 Anecdotally, it feels like excess capacity is also playing a part in what's going on right now. In May I visited a factory manufacturing LCD monitors for both export and domestic consumption south of Shanghai - they had two lines running but space for six, and more than half of the space in their complex was vacant. As an industry gets popular, companies tend to assume that peak demand is normal, and as a result overbuild (see the American steel industry 1870-1900). Anecdotally, it feels like excess capacity is also playing a part in what’s going on right now. In May I visited a factory manufacturing LCD monitors for both export and domestic consumption south of Shanghai – they had two lines running but space for six, and more than half of the space in their complex was vacant. As an industry gets popular, companies tend to assume that peak demand is normal, and as a result overbuild (see the American steel industry 1870-1900).

]]> By: purple http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27256 purple Wed, 26 Nov 2008 14:32:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27256 China cannot increase domestic demand without increasing wages in their working class population. Increased wages destroy their big export advantage.<br/><br/>They are in a Catch-22 which will become more apparent in a few years. There are many other countries eager for that industry, this is capitalism after all.<br/><br/>While it's possible that China could be a dominant power in 20 years - it's also equally possible it could look like Mexico right now. China cannot increase domestic demand without increasing wages in their working class population. Increased wages destroy their big export advantage.

They are in a Catch-22 which will become more apparent in a few years. There are many other countries eager for that industry, this is capitalism after all.

While it’s possible that China could be a dominant power in 20 years – it’s also equally possible it could look like Mexico right now.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27247 Anonymous Wed, 26 Nov 2008 12:16:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27247 If road building and power plants is China's hoped for engine of economic recovery, but factories are closing for lack of demand in the US and elsewhere, to what destination the megaWatts and to what destination the Chinese on those roads. If road building and power plants is China’s hoped for engine of economic recovery, but factories are closing for lack of demand in the US and elsewhere, to what destination the megaWatts and to what destination the Chinese on those roads.

]]> By: Ryan Barnes http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27243 Ryan Barnes Wed, 26 Nov 2008 11:37:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27243 While it certainly appears that all sectors will see severe slowdowns, China does still have at least $1.5 trillion reserves and it stands to reason they will dig deep if need be to stabilize sentiment amongst the citizens.<br/><br/>Also, how much weakness to we really expect to see? Shanghai Index is down over 55% from its peak; a lot is already reflected in equity prices.<br/><br/>RB While it certainly appears that all sectors will see severe slowdowns, China does still have at least $1.5 trillion reserves and it stands to reason they will dig deep if need be to stabilize sentiment amongst the citizens.

Also, how much weakness to we really expect to see? Shanghai Index is down over 55% from its peak; a lot is already reflected in equity prices.

RB

]]> By: mft http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27240 mft Wed, 26 Nov 2008 11:08:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27240 Some of this has been in the news for a few weeks already. Cement is new, though logical, given the situation with steel.<br/>Investment accounts for about 40% of China's economic activity. The important question now, is how much of the product of their investment goods industry could they attempt to export, and how far could they reduce the price on them? Do we face an onslaught of dumping in global markets? This could give another turn of the screw to deflation worries. Some of this has been in the news for a few weeks already. Cement is new, though logical, given the situation with steel.
Investment accounts for about 40% of China’s economic activity. The important question now, is how much of the product of their investment goods industry could they attempt to export, and how far could they reduce the price on them? Do we face an onslaught of dumping in global markets? This could give another turn of the screw to deflation worries.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27234 Anonymous Wed, 26 Nov 2008 10:27:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27234 On the bright side, Beijing residents get to experience another Olympic sky sooner than they expected. On the bright side, Beijing residents get to experience another Olympic sky sooner than they expected.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27216 Anonymous Wed, 26 Nov 2008 06:58:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27216 “This is a bleak winter for the cement industry,” says Yang Dongsen<br/><br/>This is the real factor to watch in China and India, cement is the building blocks of all industry. If it crashes so does their industry. I have no illusions that if this sector collapses their economic growth will contract in proportion, damm the growth projections.<br/><br/>Skippy “This is a bleak winter for the cement industry,” says Yang Dongsen

This is the real factor to watch in China and India, cement is the building blocks of all industry. If it crashes so does their industry. I have no illusions that if this sector collapses their economic growth will contract in proportion, damm the growth projections.

Skippy

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27215 Yves Smith Wed, 26 Nov 2008 06:55:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27215 There are a lot of people who called a slowdown (admittedly still a minority) and a smaller subset who argued that investment had to take a hit along with exports, the two are linked. Amazing how many did NOT want to acknowledge that. There are a lot of people who called a slowdown (admittedly still a minority) and a smaller subset who argued that investment had to take a hit along with exports, the two are linked. Amazing how many did NOT want to acknowledge that.

]]> By: Ubiki http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down.html#comment-27211 Ubiki Wed, 26 Nov 2008 06:42:00 +0000 http://www.nakedcapitalism.com/2008/11/chinese-heavy-industry-slowing-down/#comment-27211 This is not at all surprising. I'm surprised that the NYT takes so long to figure that one. Take a read at:<br/><br/><a HREF="http://cij.inspiriting.com/?p=362" REL="nofollow">Can China really ‘de-couple’ from a US recession?</a><br/><br/>That article predicted a major Chinese slowdown in January. This is not at all surprising. I’m surprised that the NYT takes so long to figure that one. Take a read at:

Can China really ‘de-couple’ from a US recession?

That article predicted a major Chinese slowdown in January.

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