Did You Ever Think We Would Envy China’s Economy?

by William Teach | July 14, 2011 8:56 am

Because their economy is going so great that they are now trying to put the brakes on their overheated economy

Reporting from Beijing[1]– While the Obama administration struggles to jump-start the stalled U.S. recovery, policymakers in Beijing have an opposite but equally formidable task: putting the brakes on China’s speeding economy without triggering a slump.

How well they succeed holds enormous consequences for the world economy, where China has emerged as one of the few reliable engines of growth.

How great is their economy?

The government announced this week that China’s economy expanded at an annualized rate of 9.5% in the second quarter from a year earlier. That’s slightly slower than the first quarter, thanks largely to efforts by authorities to cut bank lending and hike interest rates. Their hope is to tame inflation that’s angering the nation’s consumers, and to let some air out of a worrisome real estate bubble that many fear could burst.

Compare that with the estimated 1.8% for the United States per the Commerce Department (official numbers will be released on July 29th). I believe it was Rush who stated yesterday that can you imagine a time when economists would envy the economy of a communist country? Of course, that was before a think skinned and petulant 5 year old[2] bought the Presidency and sent the United States on the road to Greece.

Of course, not everything is lollipops and unicorns

Although China’s gross domestic product growth is the envy of slow-growing industrialized nations, cracks are emerging in its economic model. China leaned heavily on housing construction, public works – and billions in government borrowing – to power through the global slowdown. You can see it in empty highways paid for with public debt, in vacant new apartment blocks in Chinese cities and in the faces of grumpy shoppers in the produce aisles where prices for basics are soaring beyond the reach of average households.

The worry is that this kind of stimulus has artificially juiced China’s economy, making it vulnerable to a hard landing. How severe the challenges are is open to debate. Many analysts are confident that China can slow growth without derailing its economy. But what’s acknowledged by experts both inside and outside of China is that the nation’s current path is unsustainable.

Hmm, does that sound like what Obama and the Democrats attempted? Of course, it appears as if China has leaders who know what they are doing, as it seemed to work for them (there are a lot more factors involved that just government stimulus, of course), unlike the sheer incompetence of Team Obama, who couldn’t even make Big Government give aways they love work. But, then, they’ve never been able to get their costly BG programs to work – unless the point was to keep people in poverty with a promise of more aid. Then they worked great.

Crossed at Pirate’s Cove[3]. Follow me on Twitter @WilliamTeach[4].

Endnotes:
  1. Reporting from Beijing: http://www.latimes.com/business/la-fi-china-econ-20110714,0,1942920.story
  2. petulant 5 year old: http://thehill.com/homenews/administration/171403-obama-warns-cantor-dont-call-my-bluff-in-debt-talks
  3. Pirate’s Cove: http://www.thepiratescove.us/
  4. @WilliamTeach: http://twitter.com/WilliamTeach

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