NIGHTWATCH: Chinese Economy – Greece on Steroids

02 China

China: The Ministry of Commerce said on 16 November that China's exports are feeling pressure from global economic uncertainties. A spokesman said the ministry cannot be optimistic about the export situation during the coming period, citing a downshift in global economic recovery, a downgrade of the US credit rating and the expansion of the European debt crisis. He said that frequent protectionist measures and trade disputes have had a “relatively large influence” on China's exports and that these issues, along with rising costs at home, have complicated China's foreign trade outlook.

Comment: The Xinhua report is significant for several reasons. First it disclosed that the Chinese government expects that the credit rating of the United States will be downgraded. Second, the Chinese economists predict a contraction of the global economy. Finally, the Chinese anticipate a contraction of globalization as the result of protectionist policies, in other words, a reassertion of economic nationalism. The Chinese seem to expect that the export markets for cheap Chinese manufactures will shrink and the prices for raw materials will rise.

The apparent Chinese linkage of the US credit rating to the European debt crisis implies that the Chinese know or believe that US banks have much greater exposure to European sovereign debt than they have admitted. The Chinese assessment evidently is that Europe will drag down the US.

One Chinese economist, a professor of finance at the Chinese University of Hong Kong, recently wrote that the Chinese banking system is nearly bankrupt already and China's Gross Domestic Product is declining, but the Chinese are hiding the data. He wrote that “every province in China is Greece.”

This note is a warning to hedge bets in China in 2012.


Phi Beta Iota:  Holistic analytics requires a responsible integration of all ten high level threats to humanity and all twelve core policy domains, among which energy and water are the most tangible.  Countries that fail to plan for long-term affordable energy and for the protection and renewal of potable water will inevitably fail.

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