Tuesday, May 29, 2007

Now Read This

Back from the holiday and there is not much new to say, so I will turn to that old standby: OPB's (Other Peoples' Books).

I recently read "China Shakes The World - The Rise Of A Hungry Nation" by James Kynge (Phoenix, 2007) and I strongly recommend it to anyone who wishes to have a clear understanding of the economic juggernaut that is steam-rolling across the globe. It is written by the former Financial Times Beijing bureau chief in a lucid, arrestingly readable style that provides personal vignettes and broader spectrum observations. Mr. Kynge has a deep knowledge of China having been there since 1982, way before the dragon even started stirring.

Some quick take-aways:
  • There is enormous excess manufacturing capacity in everything. Domestic prices are extremely cheap so exports are the only way to profit.
  • Industry is massively subsidised through below-cost electricity, water, coal, fuel, the absence of labor union wage bargaining and environmental regulations.
  • China must create 24 million new jobs every year, just to stay even.
  • Since there are few, if any, globally recognised Chinese brands manufacturers compete solely on price. Even a modest yuan appreciation could wipe out their profit margins.
There is much more to read and appreciate in this book, particularly the personal rags to riches stories which form its backbone and make it difficult to put down. In addition, is well balanced and steers away from the polemics common to current books on China.


  1. Hi Hellacious,

    Great article and superb writing.

    Thank you for pointing to the book. It it a strong confirmation. I'll try to Amazon the book to Paris.

    Googling for "OVERCAPACITIES" ... China came out. I wonder if this word exists in English.

    Sure there is an industrial nightmarish reality behind the word "overcapacitiés". Unknown to us in Europe since we we started the inception of the European Community during the sixties.

    The feeling is already marginally in the press with a few articles on the subject and, above all, figures that won't cheat:
    - investment and savings rates in China,
    - Germany exports soaring.

    A recent day-trip to your local W-Mart or Carrefour shop will act as a finger confirmation.

    The world is possibly about to run throught its first "accross-the-globe" industrial overcapacity crisis.

    Effective industry is using massive mechanisation around the globe. No doubt that the Chinese have moved this step up as well.

    It looks like some irrepressible deflation factors are now in place:
    - Chinese and other asian industrial prices down (whatever the currency rates),
    - US (and other) housing prices down (whatever the interest rate manipulations).

    On the pumping side, anyone to expect the Chinese government to turn out Roosveltian? I do not.

    Ite, missa est, isn't it?


  2. François,

    Overcapacities or excess capacity is a phenomenon of overaccumulation and inherent to the system. There are contervailing tendencies but, in the last instance, these give way and overproduction crisis ensues.

    What is an overproduction crisis?

    Try this, from Patrick Bond, for a short explanation:

    Actually, not at all new or overcome but, with the rise of counter-cyclic policies, largely mitigated but only at what has been an increasingly great cost.

  3. The SRS looks like it is finishing up an ABC correction.

  4. "Overcapacities or excess capacity is a phenomenon of overaccumulation and inherent to the system."

    Thank you for the link.

    Ok on most the ideas. However I wont't agree about the word "system". In my humble opinion there is no such "system" at this stage. Just conflicting interests, groups, people and nations.

    Of course, it is a bit paradoxical - bordering to distasteful humour - that the last communist state on the planet is brewing a crisis that is a typical outcome ot the capitalism.

    Well, that's alas quite logical(:


  5. At least from a dialectic perspective, the only one which has so far been able to capture change and process as more than mere increments, 'the conflicting interests, groups, people, nations' are exactly manifestations of - and assist in sharpening - the more properly economic contradictions which drive the capital system that, in its essence, is one of a particular historically limited set of social relations.

    In short, if by 'conflicting' you mean competing, its necessary to ask what drives these competitions, which also means moving deeper than can be accomplished within neoclassical economics and most other status quo supporting, generally static, orthodoxies.