China is meant to be the world’s banker, the world’s biggest economy, and so on.
Yesterday I was looking at some of the warnings about the international debt problems.
One of the interesting observations is China’s number of unsold apartments. Some people are suggesting the number is 65 million. How does a nation end up with 65 million unsold apartments?
It appears to me that the Chinese economy has always been part real and part fake, but it is increasingly becoming fake. China has an economy growing at upwards of 10% per year (currently 7.8%). Yet its trade surpluses are now much smaller ($193 billion) than Germany’s ($238 billion), and its economy is much larger. By contrast Germany with bigger trade surpluses and a smaller economy has 0.7% growth. The Chinese government also has no debt while Germany’s government has 55% of GDP worth of debt. So how does China get 10% growth?
Compare China’s growth with Germany’s:
| Country name | 2009 | 2010 | 2011 | 2012 |
|---|
| China | 9.2 | 10.4 | 9.3 | 7.8 |
| Germany | -5.1 | 4.0 | 3.3 | 0.7 |
Then compare GDP:
| Country name | 2009 | 2010 | 2011 | 2012 |
|---|
| China | 4,991,256,406,735 | 5,930,529,470,799 | 7,321,935,025,070 | 8,227,102,629,831 |
| Germany | 3,298,219,195,019 | 3,282,894,736,842 | 3,624,861,111,111 | 3,428,130,624,839 |
And then compare trade surpluses:
| Country name | 2009 | 2010 | 2011 | 2012 |
|---|
| China | 243,256,567,920 | 237,810,389,608 | 136,096,761,578 | 193,139,152,768 |
| Germany | 199,476,071,253 | 207,725,054,212 | 223,323,671,923 | 238,710,734,689 |
So, on average, Germany’s trade surpluses have been about $216 billion, while China’s have been $202 billion, on average, per year. Germany’s economy was smaller: $3 trillion to $5 trillion in 2009, about 2/3rds the size of China’s. Yet China’s economy is 65% larger than it was in 2009 while Germany’s is 3% larger! How is this possible? The Chinese government has no debt. So where is the money coming from?
To compare China and Germany further, Germany is 12th on the list of transparency international in least corrupt public sector (a bit low, really), while China is 80th! China is below Senegal and equivalent to Greece! See here.
Basically, it seems that China is printing money, and that’s what’s underpinning both its growth and its economic boom. China is like organised crime. Organised crime buys restaurants, so that its leading people look like respectable business people, but the real money is coming from drug sales. China has people working for very low pay and making money out of exports, but behind the scenes it is printing money. Basically it has one government agency making loans to another government agency which hands out money for property development. But the money underpinning the loan isn’t real. At least the Mafia’s money is real, if illegal.
Ironically, it appears to me that the US government has been selling its debt to China, debt that it will never be able to repay. China has been exchanging that debt for monopoly money, money that isn’t real.
Judging from Germany’s experience, China should really have grown only a tiny fraction in the last 4 years, not 65%! This means that when the economic bubble finally bursts, the Chinese economy will collapse. I predict that when the future economic tremors eventually take effect, then the yuan will no longer be legal tender in many countries, because people will have no idea how much it is really worth, since it is pegged to many other currencies. The current speculation is that the yuan is pegged too low. In reality, it is probably significantly overvalued.
As stated in an earlier post, the only realistic economic factor is terms of trade, it is the only thing that is difficult to alter with debt and creative accounting. By those standards, China’s economy will completely collapse. It will still be reasonably large, but, it may fall to being comparable to Germany’s. In 2012, that meant something like a 50% decline!
Disturbingly, countries like Australia have placed all their eggs into the Chinese basket, a basket that is not transparent, is more corrupt than some African nations, and which appears to have astonishing growth on declining trade surpluses.
embracethecomplexity 
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