China has been said to be the economic miracle of the 21st century, but alas this century has just begun, and most of its solid gains had come before the millennium not after.
What we've seen after is an attempt to run redline with 7-10% year-over-year GDP growth, something that is "unsustainable" and not only from a purely mathematical standpoint, but even in the current decade, it's not plausible.
Why you ask? Well, is China were to fully build out its industrial capacity, it could produce 5-times the products the world needs, but the world is not 5-times as big you see.
Look at its major economic markets; North America (US, Canada, Mexico), EU, Middle East and the sub-markets of Africa, Russia, South America, Australia and South East Asia.
The biggest of course being the US and EU, but if the EU is in recession and the US stops printing money - well, ouch! Right, so that's what's happening.
Of course, China has made mistakes of her own of course, poor central planning, poor future economic predictions, improper stimulus, a run of corruption, and interference in free-market economics - about what you'd expect from a communist run nation.
China has however very nicely taken advantage of global economic mistakes of its trading partners, but considering all these mistakes, without decent leadership in economic affairs, China is paddling up a dry river.
Yes, let's talk shall we? Bloomberg News had an interesting article published on July 26, 2013 titled; "China Cuts Capacity in Some Industries to Reshape Economy," which stated; "China ordered more than 1,400 companies in 19 industries to cut excess production capacity this year, part of efforts to shift toward slower, more-sustainable economic growth.
Steel, ferroalloys, electrolytic aluminum, copper smelting, cement and paper are among areas affected, the Ministry of Industry and IT said in a statement yesterday.
Excess capacity must be idled by September and eliminated by year-end, identifying the production lines to be shut within factories.
" Very interesting strategy - a page right out of the OPEC Cartel playbook - so, our companies here at home cannot join forces to divide up market share, reduce production and keep prices high, but our number on trading partner can - why do we allow this complete dismissal of free-market capitalism and WTO rules or at least the spirit of those international trade rules? The reality is that China need not mandate a cut in capacity, it is going to happen and is happening anyway - and this past insistence on high single digit year-over-year GDP growth is never going to happen considering the culture of China's population and the consumer choices they make - the concept of a consumption economy in China isn't going to happen anytime soon to bail them out of their painted in corner.
Please consider all this and think on it.