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Page added on July 19, 2015

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China’s Economy Collapsing

China’s Economy Collapsing thumbnail

Things are not looking for for China.

It seems like Beijing has averted a crisis as far as their stock markets are concerned with some heavy-handed intervention. But their corporate debt has already reached $ 16.1 trillion and is still rising.

Their corporate debt is currently at 160% of their GDP and that is twice as much as the US having deteriorated sharply in the last 5 years.

This debt mountain is going to climb an additional 77% to $ 28.8 trillion in the next 5 years.

The policy interventions in Beijing which affect corporate credit have been designed for addressing economic growth so far. But this year, it is set to reach a twenty five-year low.

Interest rates have already been cut 4 times since November 2014, bank reserves have been reduced and limits have been removed from the amount of deposits which they can lend.

Even though they want more credit to go to small companies & innovation, these measures are pretty blunt instruments.

Whenever credit is allowed to flow, the risks of the money going to problematic entities and companies is high.

Banks made an additional 1.28 trillion yuan worth of loans in June which is higher than the 900.9 billion yuan of May. Policy easing has basically focused on reducing short-term interest costs which has allowed an increase in lending as far as stock speculation is concerned. There is very little evidence that these loans are used only on profitable investments though in this economy where borrowing is still very expensive and banks don’t want to take too many risks.

The debts of manufacturers is continuing to dwarf their profits. In 2010, debts of material companies was at 2.8 times of their core profit. At the end of 2014, this figure was 5.3 times. In the case of energy companies, debt has gone up from 1.1 to 4.4 times the core profits. In industrials, the figure has risen from 2.5 to 4.2 times.

Benchmark Reporter



29 Comments on "China’s Economy Collapsing"

  1. Makati1 on Sun, 19th Jul 2015 8:42 pm 

    “This debt mountain is going to climb an additional 77% to $ 28.8 trillion in the next 5 years.”

    I stopped reading at this point. when the crystal ball comes out, I know it is a propaganda piece or they are selling something.

  2. Rodster on Sun, 19th Jul 2015 8:47 pm 

    China has more problems besides it’s eCONomy which is based on fraud and deceit. They need to get a handle on their water crisis as they have ruined 60% of their drinking water and it’s not fit for human contact, which is much different than consumption. They have massive pollution problems as well.

    Their GDP numbers have been exaggerated/lied just like they do in the US. They are no different with their much larger shadow banking system, their $25-30 trillion of cheap money dumped into their system.

    But hey at least we know what China will do to dissenters. Now I figured out what all those ghost cities errr ghost prisons were for. 😛

  3. Speculawyer on Sun, 19th Jul 2015 9:09 pm 

    “Things are not looking for for China.”

    You know it is a quality article with that opening sentence.

  4. Northwest Resident on Sun, 19th Jul 2015 9:20 pm 

    This article is almost certainly a cut-and-paste from another article I read recently, with a catchy but incoherent opening sentence added to lend to the overall quality of the effort.

  5. PrestonSturges on Sun, 19th Jul 2015 9:23 pm 

    Still it’s a nice change from all those articles about how China was going to make America their slaves.

  6. idontknowmyself on Sun, 19th Jul 2015 9:30 pm 

    I am always looking for info about how the supply chain is coping with the lack of cheap energy.

    According to this news:
    The debts of manufacturers is continuing to dwarf their profits. In 2010, debts of material companies was at 2.8 times of their core profit. At the end of 2014, this figure was 5.3 times. In the case of energy companies, debt has gone up from 1.1 to 4.4 times the core profits. In industrials, the figure has risen from 2.5 to 4.2 times.

    Supply chain is becoming more and more stressed and it is not profitable ( or energy efficient) to run a a global supply chain if you believe the news.

    Bringing back manufacturing locally seem to make more sense in an energy point of view, providing we have enough energy left.

  7. Davy on Sun, 19th Jul 2015 9:31 pm 

    China is going down. More like the global economy is going down. There is no decoupling from a major economic power. The same is true of Europe and the US. The question is how quickly. This could drag on for some time. Markets and economies are rigged these days. Rates are repressed with little real price discovery. I am thinking this could stretch on until peak oil dynamics make the central banks impotent. That could be 3-5 years.

  8. Makati1 on Sun, 19th Jul 2015 10:21 pm 

    America is buying it’s own debt like using one credit card to pay of another. It is printing money to pay it’s bills with the same end that Zimbabwe enjoyed. It has no basis to point the finger at anyone else. But that is the problem with the “exceptional” empire. They are succumbing to the same end as all other empires. Debt.

    Yes, China has problems, but none that are not also in the Us, if you look behind the curtain. Most water in the US is polluted, most of it’s food is full of chemicals that are not good for humans, the air is the same as China breathes, even if you cannot see the pollution, the dollar is Monopoly money, and it’s infrastructure is crumbling, it’s politicians are bought by the elite, it’s Constitution is shredded along with most of it’s rights, and a Nazi style Police State is forming in the lower 48. But keep China bashing. Meanwhile, they will get on with buying up all of the resources YOU will soon need to stay alive. The fat lady may be Chinese, but it will signal the end of the Empire of Chaos. Bring it on!

  9. apneaman on Sun, 19th Jul 2015 10:46 pm 

    China, USA, EU, etc are all passengers on the Titanic. Go ahead argue who is going to drown first as we all take on water. There are no life boats for anyone.

  10. ohanian on Mon, 20th Jul 2015 5:01 am 

    Relax. China is like IBM. It would take decades to collapse.

  11. peakyeast on Mon, 20th Jul 2015 5:58 am 

    Remember the movie/documentary: End of the line…

    There they realized that china was about the only nation on earth that caught more fish every year and they decided to research that.

    It was found that government officialt received bonuses if the catch rate went up. – So it went up on the paper, but not out in reality.

    I wonder how many other places similar things are happening?? Its signs like these that you get when you place the wrong type of people on the leadership.

  12. Davy on Mon, 20th Jul 2015 6:42 am 

    It is hilarious how Mak gets so hot and bothered when all the ugliness of his beloved Asia shows in articles and comments. His wonderful Asian agenda has blown up in his face. It was a silly dream of an old man with an extreme hatred of the US. Even now when we have an article on China he has to try to turn it around on the US. Good luck Mak over there in your mass overshoot of a region. I imagine when it really gets bad you will be on a flight home with your tail between your legs.

  13. Davy on Mon, 20th Jul 2015 7:03 am 

    Folks here is another Mak super hero. Russia has some real problems ahead on multiple fronts. I am not telling you this like the US and Europe do not either. I am saying I don’t see any major power with anything positive at any level. The reason I mention this is Mak wants you to believe that Asia, the Brics, and Russia are the new phoenix rising to topple the west politically, militarily, and economically. Folks, Mak is preaching an agenda of hatred for the US. Check out this scary article on Russia. Distill it because it is a US mainstream media outlet but one of the better ones relatively for honesty.
    http://www.bloomberg.com/news/articles/2015-07-19/the-42-billion-debt-trap-that-putin-has-three-years-to-escape

  14. rockman on Mon, 20th Jul 2015 7:08 am 

    A – I agree. Additionally I always have a problem when someone announce that Country A’s economy is about to “collapse” because they rarely define what collapse means. IOW it means whatever the reader thinks it means. In essence the term collapse is thus meaningless.

    China economy certainly has its problems. Now name all the national economies that aren’t having problem. As someone pointed out this is just some hack’s cut and paste spin because they don’t really know how to discuss the details of a very serious problem that all economies face: trying to maintain BAU.

  15. marmico on Mon, 20th Jul 2015 9:28 am 

    IOW it means whatever the reader thinks it means. In essence the term collapse is thus meaningless.

    Welcome to POD. 🙂

  16. Davy on Mon, 20th Jul 2015 9:36 am 

    Marmi, poor effort at cleaver and funny. Climb back in your hole and lick your wounds. You got your ass kicked in the last 6 months and aren’t man enough to admit it.

  17. marmico on Mon, 20th Jul 2015 10:43 am 

    Taking a cleaver [sic] to your innumerate word salad prattle is child’s play.

  18. Rodster on Mon, 20th Jul 2015 11:13 am 

    “China, USA, EU, etc are all passengers on the Titanic. Go ahead argue who is going to drown first as we all take on water. There are no life boats for anyone.”

    Pretty much sums up the financial/banking and economic shithole/blackhole the Global Banksters have created.

  19. Northwest Resident on Mon, 20th Jul 2015 11:35 am 

    Let’s ask Greece what the definition of collapse is. Or maybe we should ask Syria. Or any one of a number of other nations undergoing economic and social chaos and turmoil. Or how about we ask some Chinese mom and pop stock market highrollers who just lost their asses what collapse is — they’ll have a completely different perspective. Or let’s keep it simple and just ask one of the millions of Americans now living on food stamps, in poverty, because their job got shipped overseas to some Asian sweatshop while Mitt Romney or some other “elite” walked off with a pile of money leaving a smoking ruin of debt where people once worked and lived. I bet those people have their own personal and up-close definition of collapse.

    True, there are many different versions of collapse, and many different definitions. The one unifying theme that binds all the versions together is that they all totally suck for those people experiencing their own private version of hell/collapse.

    Collapse is happening everywhere right now on individual and on nationwide scales. If you’re a happy little goober living inside your corny bubble and haven’t felt collapse yet, then life is wonderful and I’m sure it always will be, until it isn’t.

    When total economic collapse happens, and it will soon enough relatively speaking, all the private individual versions of collapse will still be there — a billion or more individual definitions of collapse all combined into one big total collapse that will TOTALLY SUCK on a global scale, and on an individual scale.

  20. rockman on Mon, 20th Jul 2015 12:11 pm 

    “…a billion or more individual definitions of collapse all combined into one big total collapse…” Thus as I said: collapse has no finite meaning. As far as Greece goes the folks making a living on the tourist trade are doing great…no collapse there. OTOH lots of folks are unemployed and there world would appear “collapsed”. But a much larger percent are employed…so is their world “collapsed”.

    Would that be the definition of a “collapsed” US economy: 25%+ unemployment? Might get there one day but not anywhere close to that now. In fact employment number are up.

    So again maybe we can get off the buzz words and offer some specific metrics that define “collapse”.

  21. Northwest Resident on Mon, 20th Jul 2015 12:34 pm 

    All good points, rockman. One person’s collapse might just be another person’s motivation to get off his/her ass and turn things around.

    If I were to define “true collapse”, it would include these bullet points:

    * JIT delivery severely disabled — if JIT is working on any level, then it isn’t “collapse”, regardless of how bad any one individual’s life sucks

    * Massive unemployment — not talking 25% unemployment, but “massive”, as in perhaps only a few out of a hundred people still have jobs they go to every day, and were this the case, then we can be relatively sure that those few people reporting for work would be policemen, firemen, armed services and other governmental employees

    * NO GAS — Gasoline for transportation is either impossible or extremely difficult to come by at any price

    * Widespread rioting and hunger — with no JIT and no jobs and everybody getting scared and hungry, how else will they pass their time?

    When all of that happens on a geographically significant scale, then I’ll call it collapse.

    Greece is on the verge. Other countries are already there. From my point of view, the only reason the entire world is not “there” yet is because the central banks and the financial gurus and politicians (TPTB) are doing a fantastic job of keeping the frogs in the pot at a slow boil, keeping a lid on the fear and uncertainty, and through debt and other means basically maintaining a semblance of “all is well”. When that illusion shatters, which it could do at any time, then we’ll all get our own unique taste of collapse.

  22. Rodster on Mon, 20th Jul 2015 12:55 pm 

    “Greece is on the verge. Other countries are already there.”

    I would say Greece has been there since 2011 and the others like Italy, Spain, Portugal, Brazil (BRICS), Japan, USA are waiting in the wings

  23. Energy Investor on Mon, 20th Jul 2015 5:37 pm 

    Perhaps Rockman, you may find it interesting to review John Williams of ShaddowStats figures for unemployment in USA. Within the OECD it is more common to include people who have been long term unemployed in the total. The USA uses too many qualifications for that statistic for it to be meaningful.

  24. Makati1 on Mon, 20th Jul 2015 9:42 pm 

    Energy, I was about to suggest the same thing…lol. Thanks!

    The US is a 3rd world country when you look at the real numbers. It has to print the money to pay for it’s military, devaluing the money held by it’s citizens. Without the military, it is nothing.

    And, without the dollar as the major reserve/trade currency, it is just another 3rd world country. THAT is why the world is turning away from the USD. They know it is the only way to cripple the empire without a shooting war.

    Interesting times, isn’t it?

  25. BC on Tue, 21st Jul 2015 9:04 am 

    All one needs to know from a larger macroeconomic perspective about China is that the labor force has been shrinking for threes years running and the proxy for real productivity (differential of wages, investment, and production) is no faster than 1%. At a population growth of ~0.5%, that puts China’s potential real GDP per capita at ~0%, which is the post-2007 trend for the US and EZ, and post-1998 rate for Japan.

    Thus, one can extrapolate that this ~0% global structural “new normal” being as good as it gets per capita under a debt-deflationary regime of “secular stagnation”.

    This implies that GROWTH OF real GDP per capita, “trade”, “globalization”, profits, employment, real, after-tax purchasing power, demand for most commodities, and gov’t spending per capita is done.

    If so, then the end of growth of profits means the end of capital formation/accumulation, which in turn implies ongoing capital consumption, which finally suggests the end of capitalism.

    But socialism relies upon the ongoing surplus generated by capitalism. No capitalist surplus, no socialism. No capitalism and no socialism, then what?

    What is likely, and we’re seeing signs today, is increasing concentration of corporate equity and capital wealth ownership by the top 0.001-1% and the consolidation of capacity and centralized control and authority to the largest 25-100 firms and the state, i.e., an increasingly privatized corporate- and surveillance-state with the steady decline of social-welfare spending per capita and falling living standard for the bottom 90%+.

    IOW, we are witnessing the emergence of a private, quasi-fascist, militarist-imperialist, rentier corporate-state that will increasingly not need (un)economic growth, profits, employees, etc., but will need a growing disproportionate share per capita of resources to maintain ownership and control, including arable land, energy, water, forests, and control of the public infrastructure, including ports, highways, rails, security, etc.

    Think “Elysium”, “Rollerball”, “Z.P.G.”, “Logan’s Run”, and so on, and perhaps “This Perfect Day” or “Brave New World” for the top 1-10%.

    That leaves the rest of us human apes as “collateral damage” or fertilizer in the next phase of human ape evolution on a finite spherical planet.

  26. Boat on Tue, 21st Jul 2015 12:26 pm 

    BC…A fly in the ointment to the theories. The rich probably, for the sake of arguement, own the utilities. Soon a 25 year contract for an electric car, insulation, windows, solar, (net zero house) will be cheaper than Nat gas, oil, nuclear and conventional home and car.etc especially if gasoline gets in the $6 range. There is a tipping point where the conversion to efficiency pays dividends to the citizen and the environment.
    If you look at the solar cost curve it is already cheaper and competitive in many places. This is the beginning of a new paradigm whether the naysayers believe it or not.
    There are hundreds of examples like this, like CHP tec where systems are running cheaper than coal using boilers which run at 40-50% efficient vrs 55%-95% using nat gas saving millions of dollars and better for the environment Relatively short payback periods of 5-7 years on machines that will last decades. 83 GW and 8% of US power comes from CHP. A little talked subject. I could go on and on but doom is much more popular. I think in the end change is rampart and humans will adjust.

  27. Apneaman on Tue, 21st Jul 2015 12:37 pm 

    Boat, how many fucking times do you need the reality of Jevons Paradox pointed out to you?

    Jevons paradox

    https://en.wikipedia.org/wiki/Jevons_paradox

  28. Boat on Tue, 21st Jul 2015 1:28 pm 

    Apeman,
    No need to cuss there. Maybe you need to be Americanized. We can agree to disagree. I don’t believe in Jevons Paradox. Inputs of efficiency and population control are just a matter of education and will. Humans so far have just decided to do the exact opposite, but the tide is changing.

    I remember when the logging industry and environmentalists screamed over deforestation. Now they are made to replant trees and the comprisement was made. There are more trees than before because off the effort to replant. You can get free trees from tree growing out stations after tornados and storms now. At least in the US.
    As pointed out before, we give tax breaks for having children. We immigrate 2 million per for no apparent reason except grow for growth’s sake and drive wages down to compete better with low wage countries. Attitudes will change and politicians will change. The world is about change, just a matter of time.

  29. Apneaman on Tue, 21st Jul 2015 1:32 pm 

    Sure boat sure, tell yourself.

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