China Has Issues. But You Knew That.

The Maven Sat May 14, 2016 8:29pm EST 1 Comment

China’s economic growth has cooled to 25-year lows, weighed down by a combination of weak demand at home and abroad, factory overcapacity and increasing amounts of debt.

The economic downturn in China, that Engine of Growth that has propelled the rest of the world’s pathetic economy for the better part of a decade, has shit the bed. Make no mistake about it.

Industrial production climbed 6 percent in April from a year earlier, down from 6.8 percent in March and missing economists’ estimates for 6.5 percent. Retail sales also missed analyst forecasts, rising 10.1 percent, while fixed-asset investment increased 10.5 percent in the January-April period versus economists’ expectation for 11 percent.

One year ago, a potential slowdown was all the media could write about. it was *everything*. Now that it is actually happening, there is not a whole lot of media hysteria. I can throw charts and data at you right now, but it is Saturday. Relax and have fun. You have seen it all before. Ad nauseam. Perhaps you have become complacent. Chicken Little has squawked too many times. The sky is falling, the sky is falling.

But it is debt, both individual and corporate, that is most concerning. Not just from the magnitude of it, but the fact that a huge percentage of it will never be repaid.

Right now, Politburo members are scurrying about, pretending to fix the problem all while watching their backs so as not to wind up in a labor camp, or worse. And they are scared to death of doing anything that could cause increasing unemployment.

We saw how the price of copper was soaring in China in Q1. We saw that it was vapor, hoarding on a massive scale, support by government spending to stimulate construction. Now we see the same thing playing out in steel. Mere weeks ago, headlines were trumpeting the rise in steel output. US Steel and British companies were crying foul. Again, the output was propped up by spending – and now the tap has been shut off and margins are plummeting.