China Already Coming Out of Recession on Turbo

Amid the economic misery and consternation in the Western markets, with America desperately trying to find some solid economic grounds for her re-emergence - here I examine the reasons why China seems to be doing so well and so remarkably quickly.

While American planners and leaders - amongst all that messy partisan bickering - continue to worry and scratch their tiny heads and question why America's economic fortunes refuses to budge and turn positive, as Western stock market indices still trough and tremble continuously, unpredictably and unstoppably refusing to settle, there are now significant economic signs that China is already beginning to recover from her own deep and vicious recession. China's fortunes appear to be turning positive again. When this worldwide financial crisis and recession first hit China, as all that western investment remorselessly fled and deserted all the emerging markets - China, as well as other emerging market countries suffered a massive and shocking de-leveraging of their stock markets. Investment and loans simply vanished and the dollars all fled back to America, quickly to be invested and buried into gauranteed US Treasury instruments for safety. This has certainly strengthened the dollar into what is now recognised as a well-overvalued and dangerous commodity. China, at the beginning, suffered 20 million jobless and Russia's stock market almost committed sepuki - still precariously riding out the 70% drop in her own stock market tsunami. With the seeming death of manufacturing demand, China's manufacturing businesses were dissolving into bankruptcy by the thousand, with the clear likelihood of angry riots and revolution against its communist government. So how is it that China's fortunes seem to be turning upwards now? And why is America (and the West) still stuck in the economic bog of recession? In reports from Bloomberg, Reuters, China Daily and Money Morning, China's economy appears to be on an upturn. The reasons for this are: * On Nov 8, 2008 China introduced her own Bailout package of $586 billion - only a month after the US introduced her own Bailout of $700 billion. But China has managed to apply her bailout very quickly, efficiently and with purpose(Refer to my article 'China's Bailout: A Lesson in Planning'). There has been nothing reactionary or adhoc in China's economic measures, and the US Government's planning has seemingly been non-existent and without any real vision. * Liquidity is alive and well in China it seems, as there is already confirmation that Chinese Banks are all now strongly and freely lending again. The lending multiples in China, unlike the banks in America that still hold toxic assets, are unaffected and are relatively high. The value of new loans in January was more than double the record set a year earlier, according to figures released by the People’s Bank of China recently($237 billion). Lu Ting - an economist with Merril Lynch said:

“China looks set to be the first major economy to recover from the current global meltdown. China is the only economy in the world to see significant growth in credit to corporate and household sectors after September 2008, when the financial crisis worsened to a near collapse.”

"From the macro perspective, it's very expansionary," Lu said. "China is the first economy to see real credit expansion at this point in time, during this trough of the global slowdown. That differentiates China from other economies."

* China's economy figures, although reduced, are still on the way to an 8% expansion for 2009. In western economies - all signs are that GDP growth will go south and may go negative in certain countries. * China’s imported iron ore has climbed 28% to 690 yuan per metric ton since the end of October.

“You are starting to see the underlying demand of the Chinese economy,” BHP Billiton Ltd. Chief Executive Officer Marius Kloppers said Feb. 4. “We have seen in the steel business in China that the de-stocking cycle is almost complete and that means people are coming back into the market and buying.”

"Even if the global recession lasts years, China has the ammunition to maintain growth", said Merrill Lynch’s Lu Ting. "It has public debt of only 18.5% of gross domestic product, foreign currency reserves of $1.95 trillion, and a balanced budget."

* China has been looking to protect her own savings as well - in the form of her own dollar reserves and has recently fully realized that the more dollar Treasuries she accumulates, the less these investments will be worth on maturation due to Bernanke's heavy-handed economic ruse of trying to 'inflate away' America's massive debts with his printing press. China has recently made it known that she will now purchase US Treasuries at pre-Bailout levels(Bloomberg). My guess is that she will continue to tail off purchase of these poor paying US debt instruments and revert to purchasing gold instead. No sneakies or arguments there - since gold is a solid valuable asset. Very bad for America though. To be fair perhaps, the economic problems and policies are somewhat different between America and China. The US government seems to have little truck with the economic tenets of low borrowing, a balanced budget, low debt, high economic or financial integrity, encouraging savers etc. - all principles that the Chinese planners appear to follow avidly. America just consumes her debt endlessly, while China produces and is rewarded with vast profit and savings. Chalk and cheese, I reckon. I'm guessing right now that that elusive beast - 'market confidence' - is all cuddled up on a couch somewhere, chomping a bowl of hot, buttered popcorn and watching all these passing economic events on Bloomberg TV, whilst at the same time shaking his head vigourously - eyes bulging in disbelief, grunting loudly and laughing his cotton socks off... Market confidence is rarely wrong, after all - and the problems for America all seem to be entwined around the lack of the US government's own economic and fiscal credibility as well as concerning a sad lack of financial morality or purity within her own business and investment banking sectors. -