China economy in overdrive -- Ascending Light

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Date Posted: 11:42:40 05/29/04 Sat
Author: Weird_Enigma
Author Host/IP: 172.174.152.181
Subject: China economy in overdrive
In reply to: Weird_Enigma 's message, "Three Gorges dam forces water to fill with sewage, junk, chemicals" on 12:36:11 05/03/04 Mon

China economy in overdrive

With so many resources overextended, leaders consider a slowdown

KEN MORITSUGU AND TIM JOHNSON
Knight Ridder

BEIJING - After two decades of rapid growth, China's economy is having a global impact in all kinds of surprising ways.

The Asian giant is no longer just a source of cheap exports. Its voracious appetite for raw materials has driven up prices worldwide and created shortages. China consumes 55 percent of the world's cement, 40 percent of its steel and 25 percent of its aluminum. China's growing demand for oil is one reason crude prices are so high.

China is propelling growth throughout Asia by sucking in imports from neighbors.

"It's very hard to discuss the world economic outlook without a discussion of China," John Taylor, the U.S. undersecretary of the Treasury for international affairs, said recently.

That's why talk of an economic slowdown engineered by the Chinese government is pricking up ears from Chilean copper mines to Minnesota soybean fields.

China is trying desperately to slow its economy from a sizzling 9.8 percent annual rate of growth in the first three months of the year in an attempt to curb wasteful, often speculative investment, which is causing shortages and raising fears of a sudden collapse.

China has 4,813 cement plants -- more than the rest of the world combined -- and they still aren't enough to supply the cement for mammoth projects such as the Three Gorges Dam on the Yangtze River or the stadiums and housing for the 2008 Beijing Olympic Games.

Real estate prices soared 28.3 percent in Shanghai in the first three months of this year.

The rapid growth is straining China's infrastructure. Railways sag with cargo. Overburdened power grids fizzle. At the huge Chinese ports of Shanghai and Yantian, freighters back up for days on end, slowing down commerce around the globe.

Gao Xiang, a buying consultant for steel maker Jiangsu Shagang Group, reported a 10-day wait to get products unloaded at port.

"It's pretty much congested," he said.

"The railways are also very, very tight. There's insufficient capacity to take the cargo from the ports."

Some analysts fear that, if unchecked, the investment boom could crash, similar to the collapse of the U.S. high-tech bubble in 2000 or the Japanese financial and real estate bubble in the early 1990s.

The government's goal is to slow the pace from blistering to merely rapid. But fine-tuning the pace is tricky for a huge economy with a primitive financial system like China's. Chinese banks hold bad loans equal to anywhere from 20 percent to 40 percent of their entire asset base, so high that massive bank failures become a real peril.

"You don't want to choke off all the investment," said Bruce Murray, the representative in China for the Asian Development Bank, a regional lending institution.

Chinese Premier Wen Jiabao recently likened China's economy to a car careening down a highway.

"It's so fast we can't fully apply the brakes," he said at a business forum in Brussels. "We can only touch the pedal lightly to slow down."

The authorities hope to tame investment in offices, housing and factories, particularly in the booming coastal regions.

To discourage speculation, Shanghai has banned developers from selling apartments before they're built. Some apartments had turned over several times during construction.

Authorities are trying to restrict lending for big projects. They've raised limits how much money banks must keep in reserves and centralized approval for major projects, taking away authority from ambitious provincial officials.

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U.S. $124 billion trade deficit with China last year -- Weird_Enigma, 07:07:35 06/23/04 Wed