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Because of its rapid economic growth over the last 30 years, it’s easy to forget that China is a communist country. The Chinese, like everybody else, love money. But the Communist party is clearly in control.
One of the areas controlled with an iron communist fist is China’s media. The main TV station, China Central Television or CCTV, is owned, operated, and controlled by the government. Unlike the U.S., Chinese government officials can’t spout off their own opinion. Instead, they must speak the ‘company line’ of the ruling Communist Party and carefully choose their words.Frankly, I don’t pay too much attention to any government official, Asian or not, when they boast about how wonderful everything is. I do, however, pay very careful attention when they start talking about trouble. You see, glowing words be can true or a complete lie. But whenever the talk turns negative, you can take those warnings to the bank. And the ‘talk’ coming out of China has turned very, very negative. Just last week, five very knowledgeable insiders had some not-so-pretty things to say about the Chinese economy.

Negative Talk #1: Li Yizhong, head of the Ministry of Information and Technology, said this:

“The international financial crisis is having a severe domestic impact.
“We don’t think we’ve bottomed yet.
“Just about every industry has overcapacity.”

Negative Talk #2: China’s economic and social goals are based upon a series of Five Year Plans. The head of that planning body, Zhang Ping, described the economic outlook from his office’s perspective:
“The global crisis has not bottomed out yet. The impact is spreading globally and deepening in China.
“Some domestic economic indicators point to an accelerated slowdown this month.
“Excessive bankruptcies and production cuts will bring massive unemployment, stirring social unrest. Owing to dramatic changes in the international economic and financial environment, the Chinese economy faces growing downside pressure.”

Negative Talk #3: The Minister of Human Resources and Social Security, Yin Weimin, echoed the same warning:

“The current situation is grim, and the impact is still unfolding.”

Negative Talk #4: The biggest cheese of all, Chinese Premier Wen Jiabao, said a mouthful last week, too:

“We must be crystal clear that without a certain pace of economic growth, there will be difficulties with employment, fiscal revenues and social development.
“In this coming period, we will starkly confront the effects of the sustained deepening of the international financial crisis and pressure as global economic growth clearly slows.”

Negative Talk #5: This last comment wasn’t from a Chinese official. It was, however, from someone who should be on top of things since his country is one of the key suppliers of natural resources to China. I’m talking about Glenn Stevens, head of the Australian central bank, who said:
“The most striking real economic fact of the past several months is not continued U.S. economic weakness, but that China’s economy has slowed much more quickly than anyone had forecast.
“There is every chance that the rate of growth of China’s (gross domestic product) is currently noticeably below the 8 per cent pace that is embodied in various forecasts for 2009.”

Those five insiders have good reason to talk cautiously because the Chinese economy, while still growing at a healthy pace, is getting pulled down.

Consider these three pieces of economic news from last week …

Chinese exports fell by 2.2% in November, the first time in seven years …

Imports fell by eight times as much, dropping 17.9% in November, and …

Manufacturing output shrunk by a record amount

Information taken from: Tony Sagami, Money Markets

Picture of Beijing’s urban development: Photo by Joe

China has rewritten both the theory and history of economic development. In just 30 years, it has gone from the brink of economic collapse to the cusp of a newfound prosperity.

The current economic crises is only part of the economic cycle and is sceen as a new phase in China’s economic growth.

“The world is hardly coming to an end. At work are the time-honored forces of the business cycle - driven in this case by the US recession that should inevitably be followed by recovery.”

However painful, cyclical adjustments are also an opportunity. For China, it underscores the imperative of shifting its growth impetus to private consumption.” Stephen Roach, Chairman of Morgan Stanley Asia.

taken from: China to Deal With Global Slowdown