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China: “Rebound Is Based On Stimulus, Not Real Strength”


Confirming what we all know, here is Bloomberg’s “most improved for 2012″ (in our humble opinion) commentator, Michael McDonough, on China: “Fiscal stimulus has bought China’s new leadership time to pass critical reforms to spur domestic consumption and rebalance the economy, though there is little room for error. Central banks from U.S. to Japan, through unprecedented levels of quantitative easing, are influencing global markets more than ever. Concerns have arisen over China’s manufacturing sector losing competitiveness; companies including Apple and General Electric have moved some manufacturing lines back to the U.S.” The Bloomberg Brief note continues: “Growth in China, which is currently being supported by government fiscal stimulus targeting infrastructure investment, will probably remain between 7.5 and 8 percent. This will buy time for the new leadership to continue with reforms, including interest-rate liberalization, designed to help stoke final demand in China and properly rebalance the nation’s economy.”

In other words, the marginal economy in a world propped up by central planners, will be, you guessed it, continuing its reliance on central planner support. What can possibly go wrong? Well, nothing in Europe that’s for sure, as the worst case scenario that we forecast back in 2010 and the rose-colored glasses punditry naturally ignored – recession – is already a reality. “Europe will continue to be problematic in 2013. There are likely to be several debt crisis flare-ups as the region sinks deeper into recession.”

http://www.zerohedge.com/news/2012-12-20/china-rebound-based-stimulus-not-real-strength

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