Six hundred billion dollars may be a lot of money, even by national bailout standards, but it won’t save China from a recession.
Based on data release overnight, China reported the slowest export growth in four months. Imports suffered as the Chinese consumer felt a bit more impoverished. With real estate prices falling and the Shanghai stock market off nearly 70% from its high, the average citizen in the world’s largest country by headcount has to worry about his job.
In China, according to Bloomberg, "Manufacturing contracted by a record last month, industrial output grew by the least in six years in September, and the halving of inflation from a 12-year high in February may be another sign that the economy is losing steam."
Economists want to cling to the fiction that China’s GDP growth will only drop to 8% or so next year. It ran 9% last month. The fact of the matter is that keeping up that kind of pace is not improbable. It is impossible.
It now appears that GDP could contract by 4% to 6% in the US during the first quarter of 2009. EU countries and Japan are not likely to do much better. That leaves China with nowhere to send its goods. Only so much inventory can be piled up at the nation’s ports and on outbound ships.
There is absolutely no reason to believe if the economies of the West seize up like old engines that China can keep its export growth in plus territory year-over-year. GDP growth in China could easily drop to the 3% to 4% range. In China, where the economy has moved up by 10% for five years, that is a recession.
Douglas A. McIntyre
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