Has the Chinese Economy Hit the Great Wall?

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We left Vancouver, where we were giving a speech at the Agora Financial Investment Symposium, only a few hours after getting there. On the airplane to Beijing we puzzled about time and place — trying to work out the movements of the Earth, the sun and the airplane.

The flight took 10 hours. From our fuzzy memory of the globe, China should be almost on the exact opposite side of the world from the US. So you would head north from Canada to go to China.

But the plane didn’t seem to be going north. It was going west…or northwest. Looking out the starboard window after midnight, we saw the warm glow of the sun over the Arctic.

At least, that’s what we thought we were looking at. But then the light failed. We must have been going away from the east…so we must have been going west.

But why?

You don’t mind if we take a moment work out these important celestial movements, do you, dear reader?

If you fly from one point to another you have to take into account that the place to which you are going does not stay put while you are going there.

There are 24 time zones on the Earth. A 10-hour flight gives the planet time to complete about 40% of a revolution. This means, obviously, your target airport must rotate through 10 time zones…or about 10,000 miles if it is on the equator…toward the east while you are in the air.

The airplane must, therefore, aim not for the place you are going but for the place it will be when you get there, a place far to the east of where it was when you left.

We’re not sure this has any importance to anyone other than pilots, but we found it interesting. And the same phenomenon happens in football and quarterbacking. You aim in front of your moving target.


Big Trouble in China

There is a parallel phenomenon in investing. You don’t really care what the price of gold is today; it’s what the price will be in six months…or six years…that matters.

Revolution is a fact of life. The planet revolves. The markets revolve round and round too.

So do economies…

We’re in China today. Want to know what is going on China? We don’t know but a lot of people think they do. Here’s Paul Krugman in the New York Times:

‘The signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.’

And here’s Ben Levisohn in Barron’s:

‘Unlike three months ago, when investors were placing big bets that China’s policymakers would pump cash into the economy to spur growth, the markets seem to have accepted the fact that sluggish growth for the world’s second largest economy is its new normal.’

Where will China be in six months…or six years?

It is impossible to know. Goldman Sachs slashed its estimates for China’s growth. But it has no better idea than Paul Krugman or anyone else. The Chinese could surprise us in either direction. The economy could fare worse than expected…or better.

But one thing does appear to be happening. After 20 years of spectacular growth, China is looking for a new way forward.

‘It’s not enough just to open a factory in Shenzhen and make things for export,’ explained a Chinese colleague. ‘The days of the entrepreneur who grew up under communism and then went on to become a billionaire are over.

‘That was the first stage of China’s development. It was the entrepreneurs’ phase. And it happened right after Deng Xiaoping opened the economy up. Entrepreneurs took advantage of the opportunity, using low wages to make things for the developed countries.

‘China’s wages are still low compared with the US or Europe. But they’re not low enough. And the developed countries are no longer looking to outsource their manufacturing to China anyway.

‘The next phase will be different. No one knows what it will be. But it will be different. And yes there could be a revolution in China…but I doubt it. People are pretty happy with the last 20 years. They expect the next 20 will be good too.’

Regards,

Bill Bonner
for The Daily Reckoning Australia

Join The Daily Reckoning on Google+

From the Archives…

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The Making of a Modern Debt Slave…
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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.
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8 Comments on "Has the Chinese Economy Hit the Great Wall?"

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Andrew
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If I hovered in a helicopter above the eastern seaboard of the USA would the West coast be below me half a day later?

David
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such a loser’s view. lol

slewie the pi-rat
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ETHER AND THE THEORY OF RELATIVITY By Albert Einstein An Address delivered on May 5th, 1920, in the University of Leyden [last para]: Recapitulating, we may say that according to the general theory of relativity space is endowed with physical qualities; in this sense, therefore, there exists an ether. According to the general theory of relativity space without ether is unthinkable; for in such space there not only would be no propagation of light, but also no possibility of existence for standards of space and time (measuring-rods and clocks), nor therefore any space-time intervals in the physical sense. But this… Read more »
Andrew
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So Slewie its Ethel’s fault that the west coast wouldn’t pass by below? You and Mr. Bonner have me confused.

Xori
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Bill, you should stick to financial / economic commentary; physics does not appear to be your strong point :) The Earth doesn’t rotate “to” you because you’re within it’s atmosphere. The atmosphere moves with the Earth and carries you like a river. So, as Andrew pointed out, you can’t just cover up in a helicopter and have the Earth rotate below you; doesn’t work that way. The reason your flight goes west rather than east (or vice versa) is simply due to air currents. Planes move in accordance with air speed, not land speed. So they can only go so… Read more »
Roy Lovey
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Anyway back to China…..The young Chinese abled working bodies should start the exodus now from the factories to the farm land like the good ol’ days, why? just to save face.

Lachlan
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Assume Bill is correct. China would not have an acute pollution problem.

Carl
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Xori, you are right about the Earth not rotating below the plane but you have the wrong reason. It has nothing to do with atmosphere; in the vacuum of the Moon the effect would be the same. It has everything to do with the rotational inertia that you get from standing on the Earth. Stand on a spot and jump straight up; you will come down on the same spot even though the Earth rotates while you are in the air. You continue to move *with* the Earth before, during and after your jump (of course, you don’t notice it).… Read more »
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