Bailout fever is spreading. China is now considering a bailout of exporters. According to China Daily, Chinese exporters are suffering mightily as the global economy weakens. This is a clear indicator that the Chinese economy could be heading for trouble, says Irwin Greenstein, writing for Contrarian Profits.

The BBC reported in July that China’s exports grew at their slowest pace in four months in June, causing its trade surplus figure to fall by more than 20% from a year earlier.

In turn, the government may attempt to slow the growth of China’s currency, which makes Chinese exports more expensive.

China’s gross domestic product grew 10.4% in the first half of the year and is expected to further decline to around 9% in the coming months, according to the China Daily. The Standard Chartered Bank estimates China’s GDP growth could further slow to 7.9% next year.

When the government tightened credit since second half of last year, many businesses including those from the Pearl River Delta to the Yangtze River Delta, both China’s major economic powerhouses accounting for about 30% of the GDP, had been “pushed to the wall,” said the China Daily.

But tighter credit isn’t the only issue…

Chinese companies that supply U.S. retailers with billions of dollars worth of goods every year face a painful squeeze as the yuan rises. This of course is aggravated by the descent of the economies in the U.S. and Europe.

According to the China Daily article, the provincial government in Guangdong will put in 50 billion yuan in the coming decade to build industrial parks and improve infrastructure. It’s the way of helping stave off the move of manufacturing to low-cost markets such as Vietnam.

The shift from China to cheaper emerging markets is a trend I call “beach-ball economics.”

For example…

Turn back the clock to V-Day, and Japan is reduced to rubble from the A-bomb. But over the next 25 years, Japan’s economy saw an economic boom that lasted until the first oil crisis of 1973.

During that wild and woolly quarter century, Japan evolved from manufacturing simple cheap commodities like beach balls to more sophisticated and expensive products that revolutionized consumer markets: cars, digital TVs and computers.

In turn, countries such as South Korea and Taiwan took up the slack making your favorite rainbow-colored beach ball. Today, South Korea had displaced Germany and Japan by sending America’s highest-quality economy import car to our shores.

Last 5 posts by Irwin Greenstein

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• Investors Face A Head-On Collision In Battery-Powered Cars - January 26th, 2009
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