Chinese Consumer Will be an Extremely Influential Factor in the Years Ahead


Yesterday, the Wall Street Journal said the United States was probably already in recession. Comes anecdotal evidence from a Dear Reader in New York:

“A friend who works at United Stationers – one of the larger office supply companies – tells us that there’s a noticeable slowdown. People are being given days off with no pay, etc.”

*** And here is our new friend David Fuller of Fullermoney with an insight:

“Despite China’s dependence on the ailing US, its economy continues to charge ahead. Recently, it was announced that China’s real GDP grew by a fantastic 11.2% in 2007. There is no doubt that China’s economy is booming and in 2007, its trade-surplus doubled when compared to a year earlier. Moreover, retail sales in China have been growing at 14% per annum for many years and in the past 12 months, total sales reached almost US$1 trillion. Interestingly, the number of US Dollar billionaires in China jumped almost 10-fold in the past year from 14 to 106 individuals. All of the above leads me to conclude that the Chinese consumer will be an extremely influential factor in the years ahead.

“Elsewhere in the region, India’s economy is also growing rapidly with real GDP growth clocking in at roughly 9%. Its industrial production has slowed down somewhat in the recent past but production of capital goods continues to soar.

“As far as the Asian region’s dependence on the US market is concerned, Singapore, Hong Kong and Malaysia are the most exposed to the American consumer. Their exports to the US are equal to roughly 20% of their GDPs, compared with only 8% in China and a miniscule 2% in India.

“Due to the slowdown in the West, exports to the US from Singapore and Malaysia have declined by roughly 15% from their peaks. Yet, it is worth noting that both these nations’ total exports have still managed to grow by 6% due to surging exports to Europe and the other emerging nations. This data suggests to me that we are slowly but surely moving away from a US-centric world.”

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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  1. Just thought to post a comment, not so much directlyrelated to this article, but one related to a Kevin Kerr article posted in today’s (12th March) US Daily Reckoning.

    The article is called “SHUTTING THE GOLDEN DOOR: NO ROOM AT THE INN”.

    There were a couple of comments from Mr. Kerr I’d like to elaborate upon.

    These qutoes were:

    1) “…and even the planet, cannot sustain so many people”
    2) “The simple fact of the matter is the world’s resources – not just oil – are dwindling faster…”

    I totally disagree with the first comment, and the second comment is so very true, however, not necessarily for only the reasons that Mr. Kerr provides in his essay.

    I disagree with the first comment purely because no one knows what number of people the planet can sustain. This comment assumes so many things which are not necessarily true.

    One assumption that’s not true, is that everyone on the planet lives an existence which consumes a certain amount of commodities as to call that existence “middle class” or higher. This is simply not true. Not all people on the planet consume equal proportions of resources.

    There are people living on less than $2 a day on the planet, and they make up most of the inhabitants. They are NOT consuming anything like the quantity of resources that you and I consume. Nor the rising “middle class” in the East.

    How does Mr. Kerr know that the planet can’t sustain this number of inhabitants or more, when those that live on $2 a day or less keep on expanding?

    My guess is that the world can sustain more, but at what level of existence for those masses is up for debate. But one could hazard a guess that THAT level of existence in the future, could be much lower for most people than it is today.

    Also, it is not only the fact that the world’s population keeps on increasing that is the main driver for resource depletion, although this is a contribution. The other main contributor is the fractional reserve system that also feeds this process. I believe that this point has been raised previously by one of the DR writers, perhaps The Mogambo Guru made a point that if the Fed wasn’t created, there would probably be less people or something like that.

    Anyways, I digress. It is the time lag between credit creation (ie. a loan being made) and when that loan must be repaid to the ever expanding “debt monster” under a fractional reserve system, that is the very reason why resources are being rapaciously consumed all over the planet. This is the futile attempt by the global economy the sustain continual compounded growth.

    It is this time lag between credit creation & debt service, that must be sustained at all costs under a fractional reserve-money as debt system, or else the whole system implodes and there would be no money, since the central banks do not create the money that they would be getting back as the interest on the principal for the loan that they are privileged enough to issue to the rest of us (except for certain holders of precious metals, strategic commodities, etc…).

    The system only has enough total money as the central banks create as principal on all those loans. The interest they charge on that principal is NOT created by them, but extracted from the already existing money pooled in the system. This obviously means that someone or some people must lose out for every gain that is made by others. For every solvent entity, however, well they are doing, there is more than one on the opposite side of that trade ie. the insolvent.

    And under this system, what must be done is the continual plundering of resources, as that is the only real way of continued growth ie. making real things that are of real use & value. And this will happen until there is no more.

    Me writing this is not from any political point of the view. It’s just observation of the facts as I see them, and that the driver for resource depletion, should not be solely left on the shores of the “over population” issue but should also address the heart of that issue, which is the absolute NEED by a fractional reserve, or these days “no reserve”, banking system for the continual compound growth that must be sustained for system to “sustain” itself.

    The “over population” issue only exists because we have a fractional reserve-money as debt system that has forced us away from self-sufficiency, and into the continuous compound growth trap. Bill Bonner makes a point recently about growing ones own edible garden. Good point Bill !!!

    At the end of all of this inflation/deflation fractional reserve shenanigans, we will find out 2 things which are long term truisms, and we will learn those lessons the hard way:

    1) Continual Compound Growth is a physical global impossibility for we have finite real resources in order to make things of real value that will provide this growth. Seems like the we are going to see a global version of the story of Rapa Nui – Easter Islanders, maybe not in our life times but surely in our grand children’s.

    2) And ANY system humans come up with in the future that perpetuates this need for continual compound growth will be doomed to failure, if we survive the first collapse of the need to create continual compound growth…which is up for debate?

  2. >”exports to the US are equal to roughly 20% of their GDPs, compared with only 8% in China”

    Yes, but much of China’s exports to other Asian countries are actually destined to be exported on to the United States. China’s dependence on the US export market is largely under rather than over-estimated. Also, it remains an open question whether Chinese exports to Europe will remain solid in the event of a broader US recession which will hurt European consumers and their own ability to contribute to Chinese growth.

    Anonymous Guy
    March 13, 2008
  3. Kojacq,

    Population growth plus industrialisation equals resource depletion, that’s basically it. If the population of the US wasn’t increasing, its comsumption of oil wouldn’t be going up either. Unless you like living in an overcrowded country on 2 dollars a day, and I sure don’t want to try, we have to limits are numbers, and the best way of doing that is for countries to limit immigration. This puts pressure on third world countries who have too many kids to have less, and for western couples in countries like Italy to have more.


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