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Wednesday, June 17, 2009


buy china

ambrose evans-pritchard on what might be perceived as an egregious act of economic nationalism.

The Chinese elite no doubt feel provoked by what they call the “poison” of the US `Buy American’ clause, but the Obama White House managed to tone down the worst excesses of Capitol Hill and in any case the Chinese version is more restrictive.

It bans the purchase of foreign equipment for investment projects unless a special exemption is obtained. The measures apply to European goods, even though EU states have not imposed any such “Buy Europe” clause of their own. EU producers of wind turbines have already been excluded from a $5bn wind project, whether or not they have factories in China. ...

China’s action is extremely disturbing. It confirms what we have long feared, that the Chinese government is sufficiently worried about rising unemployment to adopt suicidal measures. Nor does this episode instill confidence in the `China recovery story’.

While exports fell 26pc in April, imports were down by almost as much. There is no real rebalancing under way from external to internal demand. China is still running a massive surplus. It is flooding the world with excess goods, and exporting deflation. This is untenable. At some point, the West will react.

evans-pritchard might be allowing hyperbole to get the better of him. how such a provision might work in practice will be far more important than how it was drafted. faced with joblessness at home, the government of china is likely to say a lot of things to placate their masses. but that is a long way from adopting "suicidal measures".

it is to be hoped that the highly destabilizing imbalances in the current account currently promoted by china's mercantilist dollar peg are resolved in time. one also hopes, however, for that resolution not to involve a debilitating trade war, rather preferring a gradual adjustment in the dollar-renminbi cross.

either way, this will add fuel for china growth skeptics, among whom you can number myself and (as always) socgen's albert edwards, via zero hedge.

I continue to be extremely sceptical and see recent events as part of a 1930s-like, long march to revulsion. Talking about long marches, nowhere in the world fills me with more scepticism than the Chinese economic recovery. The continued enthusiasm for all things China reminds me so much of the way investors were almost totally blind to the fact the US growth miracle was built on sand. China could be the biggest disappointment yet.

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The rulers of China have been constantly mis-characterized as communist.

What they are is the perfect mafia.
Sopranos writ large.

Those they rule over are free to make as much money as they can as long as they follow the mafia's orders, and give a little taste of the action.

The other poor saps pay tribute and are promised work to keep them from torches and pitchforks.

If the poor don't find work and complain they disappear.

If the rich or powerful get caught publicly embarrassing the bosses, they get a very public disappearance.

Not many complain now but the numbers will soon overwhelm the foot soldiers and lieutenants. Dissent is easy to manage when times are good.

That is all that China is.

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They seem to do a better job of running their economy than the dimwits in Washington D.C. and the Fed do here.

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