We read that China has now become the world's biggest PC market, overtaking the United States. So that's good for the computer industry, right? And China will save the world economy, won't it? Not quite.
The New York Times reports that an HSBC survey of manufacturers in China show that they are winding back production. China is slowing down.
The reality is that inflation is on the rise in China. Chinese banks are reporting massive profits, basically throwing money at the rest of the country to keep it growing but as the Financial Times reports, there are now suggestions that these are bad loans so the Chinese banks will end up taking a bath. And as reported here, China has an over developed real estate market with lots of cities and developments. Trouble is few people live there. The place is full of ghost cities.
David Magee at International Business Times says the combination of rising inflation, a credit and real estate bubble and slowing wages growth are telling us that the Chinese economic bubble will burst.
So when you read reports about China becoming the world's biggest PC market, keep it in perspective. China cannot save any industry and it's no position to save the global economy.
China is experiencing a transition from an economy that depends too much on exports and on investment in infrastructure and property to one where consumers play a much greater role. That's a structural change and it will take decades to play out. That means China is unlikely to deliver results this side of Christmas to save the West from a financial meltdown or great recession in 2011-12. China is not Santa Claus and nor is it the tooth fairy!
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