Tuesday, December 20, 2011

Continued Bad News for China's Economy

On top of an increasingly restive population, China continues to show signs of a hard landing. First, China's manufacturing sector appears to be continuing to shrink for the second month in a row. Second, China may be running a trade deficit, which is not good for a nation that depends on exports to support its economy. (H/t Instapundit). Third, local Chinese governments have borrowed a lot more than previously disclosed, meaning that they may not be able to service their loans in an economic downturn:
The findings suggest China is failing to curb borrowing that one central bank official has said will slow growth in the world’s second-largest economy if not controlled. With prices dropping in China’s real estate market, economists warn that local authorities won’t be able to repay their debt because of poor cash flow and falling revenue from land sales they rely on for much of their income.

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