With China buying up and hoarding world commodities, huge monetary expansion, and an Asian style savings style, could we see them follow Japan's lost decade? The Chinese economy is continuing to grow, but only by their government intervention in the economy, forex markets, and huge monetary expansion. Since China is pegged to the USD, they are bound by the federal reserve policy. Therefore, they have a massively inflationary monetary policy. The problem is that assets will get overvalued very quickly just as Japan did in the 80's. The next upturn in the world economy could put uncontrollable upward pressure on prices in China, which would eventually lead to a collapse similar to the US currently. The problem is that Asians are notorious for a high savings rate. That could cause the next Chinese business cycle to turn into a deflationary cycle.
China is investing in commodities and needed infrastructure, roads to rural china, water treatment, energy, resources, much like the US did in the beginning of the 19th century. In contrast, we are propping up failed businesses, diverting resources away from the competent to the incompetent, drastically expanding the size of the government and shrinking the private sector, increasing regulations that will make it harder for companies to compete internationally, letting the government manage our resources and businesses, with very little going towards true investments. Neither our government nor our people have the savings and reserves that China and Japan do, so we are printing it and borrowing short, and lending long, creating a huge exposure to rollover interest rate risk. Our printed money is going devalue all dollars in circulation, and is simply going towards more consumption, inefficient spending by the government, and welfare, not investments into production of goods that companies will sell to people and countries with savings. If China is in trouble, it's because they lent so much money to the US - to the point that we will never be able to pay it back and will default, or we will pay it back with severely devalued dollars. Watch that bid to cover ratio on those treasury auctions. when there is a failure, the isht will hit the fan.
China is overpopulated. Do you know how much is necessary to bring the people in china to a normal standard of living? Like 50 trillion. What does China produce that is the best in a particular industry? By producing I don't mean chinese workers producing goods for foreign companies I mean CHINESE companies producing for the world. Chinese cars? No Chinese TVs? No Chinese airplanes? No Chinese cell phones?No Chinese internet equipment? No Chinese Computers? No Chinese optic fiber routers? No. Other than chinese hammers and other crap China does not dominate a single essential industry. People treat progress as something inevitable when it is not. US in the 19th century was growing by leaps and bounds and was quickly becoming a place where people were buying stuff for the workmanship. (even master and commander film references a french ship built in america) From the very beginning, US had a world class system of law and order. China is hopelessly backward in that regard. Does anyone honestly believe that china will smoothly transition from communist party political system/system of laws to a western common law or civil law system? Not going to happen. Right now, China has a reputation for having zero intellectual property respect, counterfeiting, abuse of human rights and bad worker conditions. Stop comparing 19th century US to China. They have very little in common.
"China has a reputation for having zero intellectual property respect, counterfeiting, abuse of human rights and bad worker conditions." All good points. You still have to account for the direction each of our countries are going, and the fiscal position of the governments and people.
japan is a tiny island with little to no production/resource/manufacturing. It's heavily dependent on high tech and services. China is a completely different story. So the answer is no. A more similar comparison would be china to the 1800s industrial revolution era US.
People seem to forget that China had the world's largest economy at some point in the 1700s or 1800s. Then, Japan, Britain, and a few other countries attacked them like crazy, destroying their economy. It seems they are building it back.
I think the data on china lately is bunk. There is a chance in my mind that we could see a major problem. I don't believe that the chinese consumer can absorb all the excess capacity that china has from the worldwide slowdown. Unless they do a huge currency devaluation, there is no way they will lead the world out of this downturn. The only thing propping up the chinese economy is world bankers flooding cash into the economy. Once that cycle starts to dry up, which I think will be right about now, we are going to see the true story behind china's empty economy. They have had their reserves to help cushion the blow. But watch in the next 6 months as we see their trade surplus collapse. They will turn into yet another country dependent on debt markets.
spend a few weeks here and you may change your mind http://www.digitimes.com/index.asp http://www.digitimes.com/tag/china/00151.html