China Holds Up The Sky
PaPaPeng
World economy
Stronger China
Sep 27th 2007
http://www.economist.com/opinion/displaystory.cfm?story_id=9867004
From The Economist print edition
Thanks to China, an American recession need not cause the whole world
to crash
ECONOMISTS have long warned that the world economy could not fly for
ever on the single engine of American demand. A one-engined plane is
more likely to crash. With its housing market blighted and its
consumers growing fearful, America now faces a mounting risk of
recession. The good news, however, is that the world has found some
powerful new engines in China and other emerging economies. Even as
credit markets seize up, a world economy that is less dependent on the
United States is more likely to stay aloft.
The power of this new motor is startling. For several years, emerging
Asian economies have accounted for more of global GDP growth than
America has. This year China alone will for the first time accomplish
the same feat all on its own (at market exchange rates), even if
American growth holds up. American consumer spending is roughly four
times the size of China's and India's combined, but what matters for
global growth is the extra dollars of spending generated each year. In
the first half of 2007 the increase in consumer spending (in actual
dollar terms) in China and India together contributed more to global
GDP growth than the increase in America did.
Of course, this silver lining has its cloud. A sharp slowdown in China
now would have much nastier global consequences than in the past, and
the Chinese economy has weaknesses. But it does not look like getting
into trouble over the next couple of years (see article)—the period in
which America looks as though it may be feeble. If China can keep
flying high, it will help keep the world economy safe.
Of course, if America suffers a recession, then Asia's exports will
weaken. But this should not hurt GDP growth too much because other
factors should help offset the weakening. It helps that China and most
other Asian emerging economies are now exporting more to the European
Union than to America. China's exports to other emerging economies are
growing even faster. It helps, too, that domestic spending has
strengthened and is likely to stay strong: China, along with most of
the rest of Asia, is one of few parts of the world without a housing
bubble.
If emerging Asian economies start to look weak, their governments have
some scope to strengthen them. Most, with the exception of India, have
small budget deficits; some even have surpluses. So if exports
collapse, governments also have ample scope to boost domestic demand.
Commodity prices, too, will continue to feel the effect of the
emerging economies' increased importance. It is commonly assumed that
an American recession would cause a sharp fall in the prices of oil
and other commodities. But emerging Asia accounted for two-thirds of
the increase in world energy demand over the past five years. So if
Asia remains strong, commodity prices should too, and
commodity-producing emerging economies such as Brazil, Russia and the
Middle East will also continue to thrive.
Steady on
Emerging Asia cannot pick up all the slack if America goes into
recession. Average world growth will slow—and, arguably, it needs to.
But Asia can help to keep the world chugging along. Indeed, a modest
slowing in the American economy could even help Asia in the long run
if it forces governments to switch the mix of growth from exports to
consumption and so make their future growth more sustainable.
Not so long ago, the rich world used to regard emerging economies as
risky and unstable. That view needs to change: emerging economies now
look like a force for stabilising the world economy.
AllEmailDeletedImmediately
"PaPaPeng" <PaPa...@yahoo.com> wrote in message
news:bd0of3hfoht455vte...@4ax.com...
>
i'm really quite sick of paying out the bucks to hold up anything.
James
wrote:
> "PaPaPeng" <PaPaP...@yahoo.com> wrote in message
>
> news:bd0of3hfoht455vte...@4ax.com...
>
> i'm really quite sick of paying out the bucks to hold up anything.
Most Americans are tired of paying out bucks to American labor.
That's why they buy Chinese. Blood might be thicker than water but
the greenback is their god.
webs...@cox.net
I"m tired of both.
A lot of American labor has priced itself out of the world market
(with the complicity of the American companies).
But it really is getting difficult to buy something--anything--that
isn't stamped "made in China".
I looked at a crock of Italian cookies. The pot was made in China.
Gordon
@w3g2000hsg.googlegroups.com:
Typical economic progression.
After WW2 everyone complained of the cheap Japanese imports.
When they priced themselves out of the market, manufacturing
went to Tiawan. Then to Korea, Indonesia, now it's China's turn
webs...@cox.net
> websu...@cox.net wrote in news:1190948003.484997.237140
I remember the time of lots of stuff from Japan. I would see Japanese
products.
But this seems different. I'm actually paying attention to the source
of products, and it seems like EVERYTHING I try to buy is Chinese.
Nothing against the Chinese much, mind you. But the trade is
certainly one-way, and hugely lop-sided.
Anthony Matonak
...
> But this seems different. I'm actually paying attention to the source
> of products, and it seems like EVERYTHING I try to buy is Chinese.
> Nothing against the Chinese much, mind you. But the trade is
> certainly one-way, and hugely lop-sided.
This is because shipping and communications are more advanced, and
cheaper, than they used to be. It's easier now to export manufacturing
than it ever was in the past. It's also quite attractive when you have
a government that is willing to machine gun down anyone who protests.
This helps keep wages low.
Anthony