By Jim Jubak

In a train wreck, there comes the moment when it's no longer possible to avert disaster. Pull the brakes as hard as you can, the momentum of the train is so great that disaster is unavoidable.

I fear that China's economy passed that point of no return in the second quarter of 2006.

Today, I'm going to tell you why I think China's economy is headed for a train wreck. Not tomorrow, but in the reasonably near future. I'd say 2009.

msn

an economy can have too much growth. In China, it has led to massive overinvestment in manufacturing assets in sectors already suffering from oversupply. Investment in fixed assets -- everything from steel mills to cement plants to oil refineries to highways -- grew by 30% in the first half of 2006.

Edited August 6, 200619 yr by regfootball

We can only hope walmart colapses with them.

For anyone interested, here's part 2 of the column on how it will affect us here in the US.

http://articles.moneycentral.msn.com/Inves...llHitUsToo.aspx

Nineteenth-century U.S. capitalism was exceedingly efficient at cutting its losses -- companies went bankrupt and assets were liquidated with extraordinary speed. That's not true of the Chinese economy. China's current government has made it abundantly clear that it's willing to sacrifice just about anything -- profits, the environment, public health, judicial due process -- to preserve jobs.

For example, China produces an impressive 600,000 university-trained engineers annually. But thanks to an educational system that stresses rote and memorization, McKinsey calculates that only about one-third of those engineers have the skill level demanded of an engineer by a global economy. That's great for the qualified one-third: Their salaries have soared. But it's bad news for the two-thirds who aren't able to find jobs that match their expectations. An underemployed and dissatisfied class of university graduates is far more of a threat to the government of a developing country than unrest among the peasants.

But the danger is that without some version of these destructive mechanisms, after the train wreck arrives in 2009 (by my best estimate), the Chinese economy could wind up stuck in a lower gear for a long time. (Think Japan.) A lower gear might be just 7% GDP growth by the official numbers, but that still represents just breakeven in China's race to find jobs for all the new workers its population throws up each year. And 7% growth would be a huge four percentage points less demand growth for the global economy.

We can only hope walmart colapses with them.

176593[/snapback]

LOL

On the Walmart note: if Walmart were a country, they'd be China's 5th largest trading partner.

yea, just think of all the rural jobs we could destroy in this country if we could only get rid of Walmart..........................................f@#kin brilliant..............

our local distribution center employs 6-700 thats just stuff for the retail stores, then theres another DC for food that employs just as many.........................f@#kin brilliant alright............I guess it would be a fair trade off to loose all those American jobs if China doesnt manage to create its necessary 20 million new jobs......................ey ? absolutely f@#kin brilliant !

I hope for the success of all American businesses and their employees regardless of what dress code of Americans they employ.

our local distribution center employs 6-700 thats just stuff for the retail stores, then theres another DC for food that employs just as many.........................f@#kin brilliant alright............I guess it would be a fair trade off to loose all those American jobs if China doesnt manage to create its necessary 20 million new jobs......................ey ? absolutely f@#kin brilliant !

I hope for the success of all American businesses and their employees regardless of what dress code of Americans they employ.

176759[/snapback]

http://www.forbes.com/forbes/2005/0328/046.html

yea, just think of all the rural jobs we could destroy in this country if we could only get rid of Walmart. f@#kin brilliant.

176755[/snapback]

For every job Wal-Mart gives an American citizen, two more get shipped overseas to the new Tyco China plant in duty of making plastic, radio-controlled red Dodge Rams that can go .0001 miles-per hour down the f@#king driveway.

Wal-Mart doesn't need to go away. You are right that it would bear negative effects on the economy. No, they don't need to go away, but be downsized in how many locations there are, the size of their stores, and so on. They also need an upper brass who gives a $h! about the employees, as well.

Edited August 7, 200619 yr by YellowJacket894

Agreed about some of the brass view on employees, more than I can talk about in fact. I will say they are not the "family oriented" employer they sold themselves as being

But the product thing. All the stuff that has been in chain stores since the 60's has had labels from China, Japan, India, Pakastan, Mexico, ect. Its really nothing new. I remember our Grandparents and parents complaining about "MADE IN _ _ _ _ _". It still never changed anything. This is the direction our "corporate leaders" were going to take us no matter what. Blue collar America has always been against it but you cant fight big money, this is how they get richer.

I'll still always be right here to throw it right in their face however, for what little good it does. If you want to improve the quality of working class America, seemingly known as "white trash", you will improve the quality of their lives. This cant be done by running them back into the gutter everytime they start to climb out.

Just something to think about...............thats all....................

We can only hope walmart colapses with them.

176593[/snapback]

That has got to be the dumbest statements I have read in a while.

That has got to be the dumbest statements I have read in a while. 

176815[/snapback]

I don't know, at times it makes sense...

Wal-mart will have a nasty fight coming in the next few years...