Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

The Myth of Chinese Decoupling

By

Someday the country may be less dependent on the US, but not any time soon.

PrintPRINT
As goes the US consumer, so goes Chinese manufacturing. Here's a long but educational video produced by Vanguard on several Chinese manufacturing cities and what the economic downturn has meant for them. It's well worth a play.



That video is more confirmation of the Chinese manufacturing and unemployment woes outlined in How Will China Handle The Yuan? and over a year ago in Is China's Growth Story Coming Unglued?

Yet the myth of Chinese decoupling still persists.

Some day, China will be far less dependent on the US. But that day isn't in the immediate foreseeable future. The videos are proof enough. Moreover, a strong case can be made that Obama Risks Global Trade War With Misguided Tariffs.

For now, stocks are rising along with the biggest global reflation in the history of the world, by central bankers in nearly every country in the world, including China.

However, such stimulus isn't infinite and isn't without cost, nor can temporary increases in demand caused by massive giveaway programs be cause for permanent celebration. At best, stimulus programs shift demand forward, stretching out the recovery period.

At worst, such programs add to mal-investments in housing, commercial real estate, and other areas. Government programs seldom, if ever, allocate resources effectively. The wildly popular Cash for Clunkers program actually destroyed productive assets, a repeat (on a small scale) of the misguided efforts of FDR in the Great Depression to drive up prices of goods.

Yet for all these efforts, unemployment is still rising, and even Fed officials admit the outlook for employment and consumer spending is far from rosy. Please see The Problem with Janet Yellen's Recovery Outlook for details.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE