America’s facing not one but four “fiscal cliffs”: Bush-era tax cuts, Pentagon budget cuts, social-program cuts and the continuing battle over “Obamacare.”
China, though, has even bigger problems.
Five months ago, we quoted World Bank President Robert Zoellick’s warning of “a spreading crisis” in China that could consume the $75 trillion global economy.
Back then we bluntly asked: “China? Or America? Who will crash the global economy first?”
Think: China. See First Take: China headed for a landing .
China’s economy of 1.3 billion people continues slowing, according to the latest GDP-forecast downgrade from Premier Wen Jiabao, reported Keith Bradsher of the New York Times.
Earlier this week, MarketWatch’s Carla Mozee reported that China’s slowdown is already impacting stocks in Brazil, one of China’s leading trading partners.
Full story: Brazil stocks drop on China slowdown worries .
So let’s shift our attention away from election-year bickering and ask: “Will China push America into a recession and new bear market?”
“China might already be in recession,” warns Trefor Moss in his brilliant “5 Signs of the Chinese Economic Apocalypse” in the journal Foreign Policy. Actually, five huge apocalypses. “
The numbers show that the country’s storied growth engine has slipped out of gear. Businesses are taking fewer loans. Manufacturing output has tanked.
Interest rates have unexpectedly been cut. Imports are flat. GDP growth projections are down.”
Wen Jiabao’s 2012 growth target at 7.5%, if it happens, “would be China’s lowest annual growth rate since 1990.”
That led Moss to dig deeper, where he uncovered those five signs.
You don’t have to be playing poker at a Vegas casino to wonder if maybe, just maybe, China’s five-card catastrophe might trump America’s four-card “fiscal cliffs” hand.
We know China’s downturn is already is impacting Brazil’s stock markets. So America’s next in line.
Warning: China’s local governments drowning in debt
Remember the hundreds of billions of dollars that went to U.S. banks?
Well, the China central government gave a $586 billion stimulus package to local governments.
That eased the pain during 2009’s global economic downturn. But the stimulus only deferred the pain.
“Now they’re being asked to repay their debts,” Moss writes in Foreign Policy, “and that means some serious belt-tightening at City Hall.”
Sound familiar? Like euro land? Maybe your local city hall?
Back in the boom days, many of China’s local governments went wild, like pension funds in America, and bought fleets of “flashy cars.”
But now, for example, “the city of Wenzhou is planning to auction off 80% of its vehicles this year,” reports Moss.
“That’s 1,300 cars, with similar fire sales occurring nationwide.”
And China’s central government decided to cool the overheated real-estate market.
Property sales and revenue then dropped, creating a shortage of cash and confidence among potential buyers. Sounds familiar?
Source: Argentine Beef Packers S.A.
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