NYT business reporting hits a new low. It has been obvious for some years that Chinese economic figures have the inherent validity of an old Enron annual statement. The provincial figures don't correlate with the national ones. So what do we know? We have passably good figures for China's foreign trade if China-Taiwan-HK-Macau are treated as having merged. Figures for flows between them are essentially vapor. I doubt the governments involved can find figures within an order of magnitude or two. Despite a trade surplus with the US that seems headed for the $150 billion range greater China is running a trade and payments deficit with the rest of the world. Essentially the China market is a ripple effect of the US market serving as a global engine of growth with China spending its surplus even faster than it arrives and exporting capital on top of that as its nomenklatura and business class seek safer homes for their money. The East Asian governments now hold $1 trillion in US treasury securities. This amounts to an effective dollarization of their economies. Selling to the US is what keeps Asia afloat. Instead of 3 currency blocks the world is devolving into two blocks. One is the EU and WP. The other is the Americas and most of Asia. The Middle East is balanced between the two. Africa effectively doesn't have an economy except for the RSA which is clearly in the Euro block. It also means the US consumer is the only thing holding this house of cards together. Interesting times...
Meanwhile China's high growth provinces are screaming bubble on a level with Southeast Asia just before the Asian flu. Export revenues are going on a speculative property boom plus capital export.
Scott
From NYT
By THOMAS CRAMPTON
Published: November 11, 2003
ONG KONG, Nov. 10 - China reported on Monday that industrial production surged in October, highlighting again its torrid economic growth.
"The Chinese economy is absolutely red hot,'' said Dong Tao, chief regional economist at Credit Suisse First Boston. "This is great news for the world economy and people selling machinery or iron ore to China.''
China, Asia's second-largest economy, behind Japan's, said that industrial production soared 17.2 percent in October from the month a year ago. Although economists cautioned that the data could be heavily revised, the figure illustrated both China's economic might and the dangers that can accompany an overly rapid expansion.
China's economy grew 8.5 percent in this year's first nine months. Analysts said that they expected a similar rate for the full year.
"When China accelerates, the world follows,'' Mr. Tao said. "When China slows down, the world will hurt. China is no longer just another emerging-market economy.''
His sentiments were echoed in Bangkok at a meeting of central bankers from industrialized nations.
Jean-Claude Trichet, president of the European Central Bank and chairman of the Group of 10, a gathering of central bank officials from the world's 10 richest industrial nations, credited Asia with helping accelerate global growth to a faster pace than many economists and policy makers had expected.
"Asia's economy, being one of the major sources of global growth, is experiencing intraregional trade, which is reflecting the domestic demand that is strongly accelerating and improving in various economies in Asia,'' Mr. Trichet, acting as spokesman for the meeting, said. He added that China's growth would help to hasten a global economic recovery.
But Mr. Tao and other analysts have warned that the rapid pace of investment is likely to undermine the economy eventually by bloating the country's production capacity.
"Money has been flowing around so fast that we are eventually looking at an investment fiasco,'' Mr. Tao said. "Huge amounts of capacity will come online in about five years, prompting a deflationary situation.''
Despite its fevered growth, China still has one of the lowest rates of inflation in Asia. Consumer prices rose just 1.1 percent in September from a year earlier.
posted by scott 9:27 PM