China's Game of Economic Deception

Last updated on: July 8, 2009 at 1:38 pm by Desh Kapoor

China's Game of Economic Deception 2009-07-08T13:38:26-05:00 Desh Kapoor

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I got this in an email from a forum. I am not sure what the source is but the article is so good that I have to carry it verbatim for maximum impact. I have believed in this for long, finally someone else concurs with my own analysis – that China is, but a house of cards!

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Vital to the idea of a global recovery… is the idea that China, at
least, is still growing. And that, just maybe, they can help pull the
rest of us out of this crisis by our bootstraps.

Is that a real possibility? Not by a long shot. And if you’re placing
any faith in a whole new Asian miracle, I urge you right now to
reconsider. Especially if your wealth depends on it, as it might in
more ways than you imagine.

Consider Detroit. It once looked like a global mecca for capitalism
and monument to progress, too. Have you seen it lately? It’s
practically a ghost town.

Now imagine the world’s next industrial ghost towns and you might be
shocked to discover that they’re already turning up. But not in
America. Rather, in the Chinese provinces of Shenzhen, Guangzhou, or
Dongguan.

See, while China’s head honchos tout a rosier future for the “Red
Dragon” economy than seems possible… over 15,000 factories in those
areas I just named alone have already shut down… with many more
slated to close over the months ahead.

It’s an epidemic that’s happening all across Asia, though you might
not be hearing about the full scale of their meltdown on the evening
news.

Half of China’s toy factories have shut down. In fact, at least 67,000
factories overall closed in the last six months of 2008. With another
60,000 factories in the Wen Zhou Province alone about to shut down.

As many as 27 million Chinese are already out of work with 20 million
of them streaming out of the cities and back to the abandoned farms of
the Chinese countryside.

It’s not hard to figure out why…

China’s Secret “Stealth” Depression

See, the “party line” coming out of Beijing says that even with the
downturn… and with Americans not buying China’s output… Chinese
GDP could still grow another 8% this year.

But the facts on the ground tell a different story…

According to Merrill Lynch, China’s economy didn’t grow at all in the
last quarter of 2008. And it’s still contracting fast, ever since the
start of this year

Of course, official Chinese growth last year topped 9%. But if you did
the math the way we do in the U.S. and they do in Europe, the real
growth rate for the last three months of 2008 was zero

Keep in mind that China needs at least 9% growth to soak up the 24
million new Chinese workers who come of age each year something even
the Chinese Premier doesn’t like to mention.
Why the lies? It’s a huge con game. Says expat Prof. Tian Xie of
Drexel University, China’s elaborate campaign to falsify GDP numbers
“is all part of a sophisticated strategy to cheat the world.” But
China can’t keep up the deception much longer…

In one huge textile factory as big as 31 football fields and with
4,000 workers the owner racked up $200 million in debts. Afraid to
tell Beijing, he burned his records and fled the country

Officially, nobody’s protesting about losing their jobs or going
broke. Unofficially, dozens of riots have broken out in front of
closed Chinese factories

1,000 schoolteachers clashed with police over wages in early January.
Hundreds of workers swarmed a city government building in Foshan,
demanding back pay

In Northern China, a TV journalist covered a story about a hostile
labor takeover in a textile mill. Local authorities immediately
punished him and pulled the story

Creditors showed up to seize equipment from deadbeat borrowers at a
factory in southern China. Police broke up a dozen riots in the
aftermath, all of which they hid from the newspapers.
This isn’t a modern-day coincidence. In the days of emperors, Chinese
generals lied about battle kills… to keep from losing their own
heads. In the days of Mao, farmers lied about crop results… even as
20 million Chinese starve to death.

Today, local bureaucrats fudge the books to get ahead in the Party…
and the top dogs in Beijing lie to hang onto foreign investors. Padded
revenue reports… fake production numbers… overstated employment…
it’s all part of standard practice.

To say so might not sound politically correct. But ask anyone who’s
done business there. Keeping a double set of books in China isn’t just
common, it’s considered “good strategy.”

Meanwhile, northeast China home to 110 million people looks more and
more like rusted-out Detroit… only at ten times the scale.

You’ve also got under-regulated Chinese banks hiding as much as $500
billion in bad debts China’s own “subprime” loans to small businesses
and Asian property speculators…

Plus, you’ve got a $40 billion tab left over from the Beijing
Olympics… and a $140 billion tab for rebuilding Sichuan after their
2008 earthquake

How Long Can China Hide the Truth?

Here’s the bottom line:

China with 80 different car makers to bail out… tens of thousands of
huge socialist-era factories… and 100s of millions of workers to
support has a big problem.

Much bigger than they’re letting on.

And it’s not just China about to take an even bigger hit.

Korea, Singapore, Taiwan, Vietnam. Thailand. Malaysia. And
Indonesia… just to name a few, all soared thanks to the China boom.
Now they’re going bust in kind.

Korean production alone is already down 14%. Japan is off 20%.
Taiwan’s exports have dropped 28.5%. Singapore is already deep into
recession. Thailand’s decayed into political crisis.

Until U.S. and European consumers come out of their shells, the new
Asian meltdown doesn’t end any time soon.

You remember how hard the Asian currency crisis hit U.S. markets in
1997. A total “miracle” reversal in the Far East could have much
greater impact, especially in today’s already battered environment.

And you’ll want to take steps immediately to protect yourself, before
that new wall of worry reverberates back here in the U.S.

China

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