Thursday, November 6, 2008

Roubini: Next Stop On Global Train Wreck Is China . AND: How severe a slump in China?

I have to do a mini link-dump before I forget where I put the darn things. In no particular order,
From ClusterStock, the first headline story:
Nouriel Roubini has been quiet for a few days, but you didn't think he was getting bullish, did you? Of course not. In fact, now that a global systemic financial crisis appears to have been narrowly averted, he has turned his attention to the next land mine: China.

China, says Nouriel, is at risk of a hard landing (which, for China, would mean a slowdown of growth to 5%-6%). The cause? The US consumer, of course.

That recent uplift in global stock prices? A "sucker's rally." The recent economic news in the US? "Worse than awful." Read on...

For the last few years the global economy has been running on two engines, the U.S. on the consumption side and China on the production side, both lifting the entire global economy. The U.S. has been the consumer of first and last resort spending more than its income and running large current account deficits while China (and other emerging market economies) has been the producer of first and last resort, spending less than its income and running ever larger current account surpluses....MORE

naked capitalism has more Roubini excerpts.

From Brad Setser's blog at the Council on Foreign Relations:

The US, UK, Eurozone and Japan all look to be in recessions. The US and Europe had been the main drivers of global demand growth – at least for finished goods. That is going to change.

Emerging economies that relied on a commodity windfall to support higher domestic spending and investment may also need to cut back. The windfall isn’t what it once was. That also will cut into demand.

Emerging economies that relied on borrowing from the rest of the world to support high levels of domestic spending and investment also will be cutting back. They have been hit by the credit crunch.

China benefits from lower commodity prices. It has no need to borrow from the rest of the world to support high levels of domestic investment.

The world economy could really use a Chinese locomotive. But it increasingly doesn’t look like it will get one. A recent Credit Suisse report noted that the latest purchasing managers survey suggests that China is about to enter a manufacturing recession....MORE
From the Washington Post:
As China's Losses Mount, Confidence Turns to Fear

From the Los Angeles Times:
Some owners deserting factories in China

HT: Calculated Risk who commented:
Back in March, I spoke with an executive of a U.S. company, and he told me his company was scaling back their Chinese operations because their manufacturing costs in China had increased by 30%. This was due to a combination of the new Chinese labor laws, higher currency exchange, higher material costs and other factors....MORE