The comparisons have already been made between China of the 2010s and Japan of the 1980s. And we all know what happened to Japan in the 1990s and the lost decade. Perhaps more remarkable are the comparisons of China of today to the United States of five years ago. The U.S. certainly hasn't experienced the double-digit growth rates that China is now purportedly enjoying but there are plenty of warning signals that our Communist friends to the east now suffer from many of the ailments that afflicted the Capitalists here -- loose credit, an overheated real estate market, unsustainable building levels and a working class that's so poorly paid that it relies on government subsidies to prop up domestic demand for goods.
The Telegraph this week laid out a startling picture of China's economy and the reasoning why many hedge fund managers are going bearish on China's short-term future. This al-Jazeera report on one of the many new "mega ghost towns" popping up in China also paints a picture of what looks to be an unsustainable pattern.
All this isn't to say that we can all run into the streets shouting "U.S.A." As a recent report from the Carnegie Endowment (which by the way is a good primer on Chinese economics) points out, all the statistics on China's economic growth is manufactured by the state so the veracity of these figures warrant close scrutiny. It's also worth remembering that those "experts" now going bearish on China's future are the same experts who led us down the primrose path to the Great Recession.
But if the warning signals are true, if Beijing's great economic engine is going to sputter and stall, what does all this mean for the global economy and our own fragile recovering economy? Economists interviewed by The UK's Telegraph predict that if China's GDP slips to a more modest 5 percent growth rate in 2011 (it's predicted by the IMF to hit 10.5) global commodity prices could plummet by 20 percent. Maybe we'll at least be able to fill up our gas tank again...
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