Thursday, July 26, 2012

China’s Economy: The Dragon of the East is starting to Sweat

The name China has been the buzz word for Economic growth for about the past 20 years or so, and for good reason. They pretty much burst onto the scene with a socialist revolution and then have been kicking butt with their own brand of pseudo-capitalism ever since. They’ve been growing and growing and growing for years, and for most of that time at double digit rates (10%+). The Chinese economy has over time found its niche on the world stage and has been very (and I mean VERY) good at exploiting its role.

They sat around and said to themselves, “we want money and lots of it, but where is it?” Luckily, at about the same time, the US said, “why we have lots and lots of money, about a quarter of all of the money in the world if you want to get technical”. A match made in heaven if you ask me.

China wanted that money, but the US wasn’t just going to hand it over, at least not yet, they wanted something in return. Well China gave it to us alright; they gave us cheap stuff. Cheaper stuff than we’ve ever seen before, so cheap that we couldn’t get enough of it, and we just wanted more and more.

This went on to the point that we wanted more of their cheap stuff than we could afford, so we started borrowing from them the money that they saved (and boy did they save) from the cheap stuff we bought last year, and the year before that, and so on.

Well now no one has a job (except maybe Jr. Economist, which doesn’t pay very well) so it’s getting a little harder to buy all the cheap stuff. Now who’s going to buy all this cheap stuff that China is making? Not the common man in China, he’s busy saving, and he might actually be worried about losing his factory job where he made cheap stuff.

When things start getting better in the US and Europe, which WILL take some time (years), we in the west will once again be able to buy cheap stuff. But until then The Dragon of the East will have a chance to take a breather from its spectacular growth.

Everyone in China would probably hate it because, well that’s money that doesn’t make it into their country, but it might just be the break that those on this side of the world need to have a chance to get caught up on some bills and hopefully set a little something aside. We’ll see.


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