China numbers are always questionable, and the industrial metals may be more honest. Inflation has been running fairly high -- I think around 6%, though, like ours, it may be worse than reported. Here's the problem. If you are running 6% inflation and your GDP grows 7.5%, how much is actual growth and how much is an artifact of inflation? In China, you have the additional problem of not really being able to break out government spending versus the private sector. I think the U.S. statistics are often made up after a few Jack-and-Cokes; I have real doubts about the validity of numbers from the Chicoms.
Anybody who thinks China is going to be an economic powerhouse in the long-run, as long as it is a command economy, is foolish. Communism, fascism, socialism -- any attempt at centrally planning and controlling economies is doomed to collapse on itself. Yes, as long as you have countries where you can dump your excess production like Germany has done with the rest of Europe and China has done with the U.S. and Europe, you can create a temporary prosperity.
When the trade is based on the importing nation's increasing debt, the danger is as much to the exporting nation as the importing one. This is especially true in that China has been fueling our buying spree by funding the U.S. government deficit via bond purchases. As the dollar has slipped, the Chinese economy has been flooded and inflated with devalued dollars.
Now Bernanke is signaling that there may not be a QE3 (we certainly hope not) acknowledging at last that there might be a little too much inflation in the U.S. With the euro threatening to collapse, this could mean a much stronger dollar -- at least in the short-term. If the U.S. government acts sensibly (stop laughing) and decreases spending in absolute terms, we get a deflationary reset. There is a good chance the Chinese economy could flatten, if not go negative given a new Austere Europe unable to pick up any slack.
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