By Pamela Heaven
From shrinking trade to stalling factories to surprise rate cuts, signs are mounting that China is headed for a hard landing.
Tuesday investors fretted as China’s imports in June grew at half the expected pace, entrenching concerns that domestic demand in the world’s second-largest economy is cooling quickly.
The news was also not a good harbinger for China first-half GDP data to be released later this week.
While economists crunch the latest numbers, Trefor Moss, writing for Foreign Policy magazine, provides “real-world signs of China’s economic malaise.”
The stimulus that China pumped into the economy during the 2009 downturn is coming home to roost for local governments.
Municipalities are being asked to repay their debts and local officials, who indulged in fancy fleets among other luxuries during the boom years, are feeling the pinch.
The city of Wenzhou is planning on auctioning off 80% of its vehicles this year, 1,300 cars, with similar fire sales being held nationwide.
About 30 people were hurt and two police cars were smashed last month when a riot broke out in Shaxi township in Guangdong province — known as the ‘world’s factory floor.’
As exporters go bust and factories cut shifts, tensions between migrant workers and locals over layoffs and wage cuts are mounting. Migrant workers are the elbow grease of China’s growth and their disaffection could be its undoing, writes Moss.
More than half of China’s millionaires are either considering emigrating or have already taken steps to do so, a survey by Bank of China and wealth researcher Hurun Report revealed. And if they haven’t moved yet they are spending their money elsewhere.
Another survey by Allianz China Life Insurance says China’s wealthy are losing confidence in the domestic market and socking money into cash and less into stock, real-estate and other investments. Sales of luxury goods inside China are down, but investment in high-end property overseas is up.
A ‘naked official’ is a term in China that refers to an official who has sent his family and money abroad and is poised to make a getaway himself. And their numbers are rising.
Chinese prosecutors say 18,487 officials, including executives from state-owned companies, have been caught during the last 12 years while allegedly trying to flee overseas with ill-gotten gains, the Los Angeles Times reports.
As Moss points out, China’s wealthy are often members of the same family, and if China really does go into recession, a lot of rich people may decide to cut and run.
China’s ports are piled high with surplus coal as businesses and citizens try to save on electricity bills. Factory production cuts have contributed to the slump in demand.
The national price of coal is down 10% since late last year, a drop that will hit the global economy and in turn cut demand for Chinese exports.
Last year pork prices skyrocketed 57% in response to the growing Chinese appetite for meat, but over the past four months that demand has slipped. So much so that the hog-to-corn price ratio which measures whether rearing pigs is profitable dipped into the red and the government had to step in. At the same time the price of eggs has shot up so quickly that shoppers now call them ‘rocket eggs’ and Chinese consumers, shaken by the faltering economy and food safety scares, are opting to grow their own food.
