With news slipping out of China earlier in the month that its economy was slowing down much faster than had been anticipated the Chinese Communist government felt it was forced to intervene. Just as they had in 2008 when the global economy ground to a halt the Chinese government would once again flood the economy with stimulus spending much as Obama had after his election to the white house. The Chinese government feels immense pressure to keep the economy growing at double-digit rates, which allows for the huge influx of rural Chinese to move to the cities to take part in the growing economy. Add in the once a decade political power hand off and this explains the problem for the current government. Many outside of China have taken note and see trouble on the horizon as they question the emphasis on stimulus spending by pointing out that sooner or later this will come back to haunt the Chinese government. This is because often this stimulus is spent on things the government decides should be done. That sounds reasonable enough until you realize that the government is building entire cities with the capacity to hold hudreds of thousands but yet have only several thousand living there years after construction ends. They have also ordered unneeded steel factories only to see them converted into pig farms. Yeah, I really did say that just as it was reported in this article below
Empty cities, unused factories, property bubbles, all this makes you think that there is probably even more disturbing news not making its way out of China. Time will tell, hopefully when it does finally go bust over there we all won’t be drug down with China.