web analytics

Pinning hopes on China

Written By: - Date published: 9:35 am, March 9th, 2014 - 33 comments
Categories: China, economy - Tags:

Our export-led economy is a rock-star according to those on the right. Australia kept us going, and now, despite the EU still spluttering, we can fly because China will buy all our milk powder.  Which we can keep making more of without destroying our ‘clean green’ country somehow.

But there’s a potential flaw in putting all your eggs in one China basket, as a number of BBC stories have been revealing.

First came Robert Peston looking at the level of debt and subsidies that sustains Chinese growth since the GFC and the West buying fewer Chinese goods.

Over the past few years, China has built a new skyscraper every five days, more than 30 airports, metros in 25 cities, the three longest bridges in the world, more than 6,000 miles of high speed railway lines, 26,000 miles of motorway, and both commercial and residential property developments on a mind-boggling scale.

There’s unsustainable growth which has Chinese debt at a reputed 200% of GDP, and investment at an unheard of 50% of GDP. It’s building massive ghost cities.  The Chinese Banking sector has rapidly expanded from $10 trillion to $25 trillion in a few years – the increase is the size of the entire US commercial banking sector, built up over centuries.

The wheels must surely fall off at some point, but in the meantime, China must grow as the promise from above is wealth instead of democracy and a say.  Should that wealth fail…

Next comes Linda Yeuh, looking at the massive shadow banking sector – accounting for 20% of banking in China is unofficial (non-bank) lending – often at interest rates of up to 100%.

Even local government is borrowing as central government promised growth and infrastructure, but didn’t provide the funds to local government to fulfil it.

If you think our fall-out from Finance Companies was bad, it’ll be but a grain of sand compared to what China might be loading up.

And now, we have the first time China is letting a major company default on a Chinese bond. A solar panel firm can’t pay its interest on a 1 billion yuan bond.

Where are they headed, and will they take us with them if we’re depending on them for our exports and recovery?

33 comments on “Pinning hopes on China ”

  1. Bob Square Pants 1

    Shows how much you know then.

    The govt stopped subsidizing panels. Hence the company going under. More will follow. If it shows anything, it’s that Green technology can’t stand on its own two feet.

    This is where all our panels come from, so that kinda fucks the Greens solar argument.

    This has been in the works for some time. Glad you are finally catching up.

  2. adam 2

    Gotta love China – so this is going to be economic warfare 101? Or a real fubar realisation that capitalism is really a screwed up system? Maybe we can all grin and start again, once China fall’s over and scuttles the whole damn lot.

    • Tim 2.1

      “Maybe we can all grin and start again” ……
      Not a question of maybe! Unsustainable debt built on unsustainable growth (or maybe that’s the other way round). Either way, 3 finger salute – or as that Clinton lady once put it – we want to push the ‘reset’ button (in relation to Russia).
      Btw ….. it’s becoming fashionable for some to be concerned with income inequality. For those fashionistas – they at least have a basic understanding of mathematics and haven’t yet lost sight of the realities of people living together in a (dare I say it!) collective, or a community, or a city, or a “nation” even”.
      “Them Natives are getting restless” and it’s either mutually assured destruction, or the realisation that debt was built on a firm foundation of solid bullshit anyway.
      …. wooden wanna be in THEIR shoes – DERP!
      (Or maybe they’re hoping to take it with them into a Colin Craig style ‘afterlife’. All it would take is for the STUFF website to come out with the headline “Scientists say Second Life is Real”).
      Bah ….. Baaaaaahaahhhaa, Baaahaahah!

  3. geoff 3

    Where are they headed, and will they take us with them if we’re depending on them for our exports and recovery?

    Who do you mean by ‘us’ and ‘we’re’?

  4. RedLogix 5

    As long as the CCP retains it’s totalitarian grip on China it will continue to print credit and expand at 7% pa. They are in excess of 20% of the world economy now, by around 2030 they will account for about 60 – 70 % of global GDP.

    They still have around 800m peasants. China can add a fresh 20m skilled workforce into their economy each and every year for the next 40 years.

    And as long as China is allowed to fix it’s currency at a fraction of it’s real value (and ask yourself why this is when every other trading nation must float) this effectively unlimited slave labour force will destroy every other job in the world. Already it is getting hard to buy some categories of things that are not made in China.

    They have been very clever in allowing their shadow banking system to grow so very rapidly, but at the same time no one bank is large enough to damage the entire system. A few weeks ago the shadow bank system collapsed in one large city – the local govt just bailed it out and hardly anyone outside of China noticed.

    Chinese capital is on a massive spending spree throughout the world, buying up real-estate, resources and productive capacity. They’ve learnt well from the capitalist west that it’s smart to export the dirtiest, filthiest jobs out from your homeland and under the guise of various FTA’s will export millions of workers offshore. It’s the most massive economic colonisation program in all history. Absolutely the China is suffering dire environmental blowback in the homeland at present – but this is only a temporary phase. A growing and increasingly sophisticated middle-class will not tolerate environmental degradation indefinitely.

    At the same time their military budget is now $200b and ramping up rapidly. They will overmatch the USA by 2020.

    Within 20 years China will be the dominant player in the world. That fact is indisputable anyone who imagines that they will somehow stall or collapse is deluding themselves. The open question is going to be exactly how that dominance plays out.

    • Colonial Viper 5.1

      It’s not that the things you’ve said are not true, RL, it’s that you’ve not mentioned the pressures of certain very tough constraints that China is now running up against.

      China has massive demographic problems, social/political unrest, economic imbalances (eg services vs manufacturing sector imbalance), graft and environmental degradation.

      For instance, the consequences of the one child policy means that China’s population over 60 is going to massively increase over the next 30 years. IMO that alone will sink the more optimistic growth projections for China.

      • RedLogix 5.1.1

        China has massive demographic problems, social/political unrest, economic imbalances (eg services vs manufacturing sector imbalance), graft and environmental degradation.

        The point is that the CCP has the capacity to solve them. These people are not afraid of thinking big and planning for the long-term because they have the certainty that they will be around for the long-haul.

        Contrast this with Washington which is now effectively a dead-locked zombie. It is no longer controversial to suggest that the Western experiment with party political democracy has failed. At the same time a one-party totalitarian regime in China is proving wildly successful, in the face of considerable odds. This is an irony very few people in the West are willing to say out loud.

        Given this track-record I’m willing to place odds on the CCP overcoming the challenges you list as well. They are real, they are massive – but China has the capacity to respond where the rest of the world does not.

        • Colonial Viper 5.1.1.1

          Yeah, there is that. You could see it around the time of the Beijing Olympics. Smog free skies needed for the Opening Ceremony? No problem, we’ll just close all local industry, furnaces and coal fired power plants down for the entire week before.

  5. Colonial Viper 6

    Ben, I agree that massive Chinese credit creation and an over-reliance on the Chinese manufacturing industry (which for instance cannot produce trains which match the quality of what NZ WAS capable of making) is a real problem for this small country of ours.

    But as far as I can see, no NZ political party has been willing to make that very simple statement – that we need to re-localise and re-onshore NZ industries, and that we cannot continue to rely on “export driven growth” as if it was still the resource rich 1960’s and 1970’s. Markets like China, the EU, the USA and even now Australia are slowing (and perhaps possibly on the verge of another crash).

    Resource and energy depletion is real. Climate change is real. The dominance of banks and large financial institutions over even sovereign states is real. New economic ideas are needed. And whom within our political landscape is proposing them?

    I want to understand why all our political parties seem content with trying to hoodwink the electorate with yet another few years of business as usual ‘pretend and extend’?

    • RedLogix 6.1

      (which for instance cannot produce trains which match the quality of what NZ WAS capable of making)

      When the Chinese want to do quality they are perfectly capable of it. Another decade and we will no longer mention these things.

      When I was a boy all Japanese cars were “Jap Crap”. No-one says that anymore.

      And whom within our political landscape is proposing them?

      No-one is allowed to. Look at the way Cunliffe who looks like a very modest threat to the status-quo is being cut down.

      • marty mars 6.1.1

        “When the Chinese want to do quality they are perfectly capable of it.”

        The space program supports this statement – if it needed support that is, which I think it didn’t, even though I offered support for it – go figure.

      • Draco T Bastard 6.1.2

        When I was a boy all Japanese cars were “Jap Crap”. No-one says that anymore.

        Yep, I remember that. Didn’t take long for them to be the best car makers in the world. China will go the same way.

        No-one is allowed to.

        And that is the big problem with politics in Western countries – you’re not allowed to question the orthodoxy that enriches the few at everyone else’s expense and regularly crashes the economy.

        • Colonial Viper 6.1.2.1

          The inevitable conclusion is that trying to work through mainstream political parties can only be a vanishingly small fraction of what the Left does. Building mass movements, popular organisations and logistics enabling protests and peaceful resistance will be the key.

        • Populuxe1 6.1.2.2

          Um, try questioning the orthodoxy in China that enriches the top members of the CCP and leaves millions of people in dire poverty or virtual slavery.

      • Colonial Viper 6.1.3

        BTW KiwiRail engineers and consultants were over in China monitoring the build of that rolling stock. Obviously, whatever they were doing, it wasn’t enough.

        When the Chinese want to do quality they are perfectly capable of it. Another decade and we will no longer mention these things.

        In the 1960’s the Japanese became fanatical about implementing quality control initiatives e.g. Deming process control approaches.

        Today Chinese manufacturing has learnt an even more valuable lesson: western consumers and western countries are happy to hand over large sums of money for junk.

        NZ has proven that insight yet again.

      • Murray Olsen 6.1.4

        Very true, RL. I have a friend in India who gets stuff made in China. I mentioned the problem of quality to him and he told me that, when you negotiate the deal, you also negotiate the quality. If you’re willing to pay, you get top of the line stuff. My son in law, a Chinese factory owner, claims to only make the highest quality, but then I’ve never done business with him.

        Makes me wonder exactly how the asbestos train negotiations proceeded. I would have loved to be a fly on the wall.

  6. Draco T Bastard 7

    The real problem is that we keep pinning our hopes on export rather than building up our own economy. Produce everything we need here in NZ and we’re not susceptible to outside economic disasters.

  7. I have been predicting the demise of China as the result of the demise of the US for about 8 years now.

    The US Consumers until recently spend about $ 7 trillion annually. The Chinese about $1 trillion.

    The US is collapsing at a staggering but entirely predictable speed with shops closing by the thousands. Chinese billionaires and corrupt party officials are leaving the country and are buying huge amounts of real estate globally to get their loot out of China.
    In London for example entire condo buildings are build and marketed exclusively to the Chinese.

    Chinese companies are channel stuffing to keep the pretense up and they keep building entire cities where nobody lives to keep their economy going and they are printing a cob smacking $ 250 billion or so a month. It is unsustainable and ridiculous. Without the US as their biggest customer and the rest of the worlds economies tanking as the result of banker fraud and fiat currencies there is no way the <ahref=”http://www.washingtonsblog.com/2014/03/chinese-economy-crashing.html”>Chinese can keep this going. Nobody can!

    • RedLogix 8.1

      No. Everyone who is predicting the demise of China is applying the kind of thinking that is applicable in the West.

      China is completely different. The CCP can do whatever it wants – politically and economically.

      • travellerev 8.1.1

        They can do anything they want but they cannot break the laws of nature or practice Witchcraft/Magic.

        Contrary to the West people there do actually get arrested for corruption and convicted to death too. Apparently this worries the überrich and apparatchiks alike to the point where they actually leave en masse with their stolen loot. A billion angry people can be pushed only so far even by what you apparently think is of Godlike strength but in fact of course is merely a very small group of elitist scumbags.

  8. dave 9

    we are 400 percent of GDP in Debt. private debt is a basket case and Shonkey is making sure the government books are looted as well 1984 all over again I just have a feeling inside when labour and green get to see the books there going to be cooked to the Max by billy bob English

    • Yep, let’s start with the $112 billion in CDF and other derivatives!

    • aerobubble 9.2

      Key is a banker, Key knows inflation wipes out debt, it therefore follows that the world needs a massive round of inflation to wipe the debt back to something manageable. If anything Key hasn’t gone far enough and used debt to build infrastructure, swimming pools, etc, etc. As after the bout of global inflation its will be much more expense to build.

      Inevitably the cycle turns and we need a high spending high taxing government. How else are a generation of right wing idiots supposed to claim governments should not tax and spend unless we have a bout of it from time to time to make it a realistic proposition. And when is the best time, well NOW! in a debt binge waiting on massive inflationary reset.

  9. Ad 10

    Ben what did you make of Laim Dann’s much more positive article on the same topic today.

    Personally China looks like New Zealand’s substitute for an economic development policy. And seems to be working almost as well.

Recent Comments

Recent Posts

  • Tokelau Language Week reminds us to stay united and strong
    Staying strong in the face of challenges and being true to our heritage and languages are key to preserving our cultural identity and wellbeing, is the focus of the 2020 Tokelau Language Week. Minister for Pacific Peoples, Aupito William Sio, says this year’s theme, ‘Apoapo tau foe, i nā tāfea ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • NZ announces a third P-3 deployment in support of UN sanctions
    The Government has deployed a Royal New Zealand Air Force P-3K2 Orion (P-3) maritime patrol aircraft to support the implementation of United Nations Security Council (UNSC) resolutions imposing sanctions against North Korea, announced Minister of Foreign Affairs Winston Peters and Minister of Defence Ron Mark. “New Zealand has long supported ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Pacific trade and development agreement a reality
    Pacific regional trade and development agreement PACER Plus will enter into force in 60 days now that the required eight countries have ratified it. Trade and Export Growth Minister David Parker welcomed the announcement that the Cook Islands is the eighth nation to ratify this landmark agreement. “The agreement represents ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Securing a pipeline of teachers
    The Government is changing its approach to teacher recruitment as COVID-19 travel restrictions continue, by boosting a range of initiatives to get more Kiwis into teaching. “When we came into Government, we were faced with a teacher supply crisis,” Education Minister Chris Hipkins said. “Over the past three years, we ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Border exceptions for a small number of international students with visas
    The Government has established a new category that will allow 250 international PhD and postgraduate students to enter New Zealand and continue their studies, in the latest set of border exceptions. “The health, safety and wellbeing of people in New Zealand remains the Government’s top priority. Tight border restrictions remain ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • First COVID-19 vaccine purchase agreement signed
    The Government has signed an agreement to purchase 1.5 million COVID-19 vaccines – enough for 750,000 people – from Pfizer and BioNTech, subject to the vaccine successfully completing all clinical trials and passing regulatory approvals in New Zealand, say Research, Science and Innovation Minister Megan Woods and Health Minister Chris Hipkins. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • International statement – End-to-end encryption and public safety
    We, the undersigned, support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cyber security.  It also serves a vital purpose in repressive states to protect journalists, human rights defenders and other vulnerable people, as stated in the 2017 resolution of the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ministry of Defence Biodefence Assessment released
    The Ministry of Defence has today released a Defence Assessment examining Defence’s role across the spectrum of biological hazards and threats facing New Zealand. Biodefence: Preparing for a New Era of Biological Hazards and Threats looks at how the NZDF supports other agencies’ biodefence activities, and considers the context of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020
    New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020 Hon David Parker’s response following Thomas Piketty and Esther Duflo. Good morning, good afternoon, and good evening, wherever in the world you might be. I first acknowledge the excellent thought provoking speeches of Thomas Piketty and Esther ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Kaipara Moana restoration takes next step
    A Memorandum of Understanding has been signed today at Waihāua Marae between the Crown, local iwi and councils to protect, restore and enhance the mauri of Kaipara Moana in Northland. Environment Minister David Parker signed the document on behalf of the Crown along with representatives from Ngā Maunga Whakahī, Ngāti ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand and Uruguay unite on reducing livestock production emissions
    Agriculture Minister Damien O’Connor and Uruguayan Minister of Livestock, Agriculture and Fisheries Carlos María Uriarte have welcomed the launch of a three-year project that will underpin sustainable livestock production in Uruguay, Argentina, and Costa Rica.  The project called ‘Innovation for pasture management’ is led by Uruguay’s National Institute of Agricultural ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • 3100 jobs created through marae upgrades
    Hundreds of marae throughout the country will be upgraded through investments from the Provincial Growth Fund’s refocused post COVID-19 funding to create jobs and put money into the pockets of local tradespeople and businesses, Regional Economic Development Minister Shane Jones and Māori Development Minister Nanaia Mahuta have announced. “A total ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Health volunteers recognised in annual awards
    Health Minister Chris Hipkins has announced 9 teams and 14 individuals are the recipients of this year’s Minister of Health Volunteer Awards.  “The health volunteer awards celebrate and recognise the thousands of dedicated health sector volunteers who give many hours of their time to help other New Zealanders,” Mr Hipkins ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community COVID-19 Fund supports Pacific recovery
    The Minister for Pacific Peoples, Aupito William Sio says a total of 264 groups and individuals have successfully applied for the Pacific Aotearoa Community COVID-19 Recovery Fund, that will support Pacific communities drive their own COVID-19 recovery strategies, initiatives, and actions. “I am keen to see this Fund support Pacific ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community benefits from Māori apprenticeships
    Up to 50 Māori apprentices in Wellington will receive paid training to build houses for their local communities, thanks to a $2.75 million investment from the Māori Trades and Training Fund, announced Employment Minister Willie Jackson today. “This funding will enable Ngāti Toa Rangatira Incorporated to provide its Ngā Kaimahi ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Training fund supports Māori jobseekers
    Rapidly growing sectors will benefit from a $990,000 Māori Trades and Training Fund investment which will see Wellington jobseekers supported into work, announced Employment Minister Willie Jackson today. “This funding will enable Sapphire Consultants Ltd. to help up to 45 Māori jobseekers into paid training initiatives over two years through ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ruakura Inland Port development vital infrastructure for Waikato
    The Government is investing $40 million to develop an inland port at Ruakura which will become a freight super-hub and a future business, research and residential development for the Waikato, Urban Development and Transport Minister Phil Twyford, and Māori Development Minister Nanaia Mahuta announced today. The funding has been has ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Appointments made to Defence Expert Review Group
    Defence Minister Ron Mark announced today the establishment of an Expert Review Group to review a number of aspects of the New Zealand Defence Force’s (NZDF) structure, information management and record-keeping processes.  The Expert Review Group’s work arises out of the first recommendation from the Report of the Government’s Inquiry ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • No active community cases of COVID-19
    There are no active community cases of COVID-19 remaining in the country after the last people from the recent outbreak have recovered from the virus, Health Minister Chris Hipkins said today. “This is a big milestone. New Zealanders have once again through their collective actions squashed the virus. The systems ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Clean energy upgrade for more public buildings
    More public buildings will be supported by the Government to upgrade to run on clean energy, the Minister for Climate Change James Shaw announced today. Minister Shaw announced that Lincoln and Auckland universities will receive support through the Clean-Powered Public Service Fund to replace fossil fuel boilers. Southern, Taranaki, and ...
    BeehiveBy beehive.govt.nz
    3 weeks ago