[OPE] The Danger of Overcapacity

From: michael perelman <michael@ecst.csuchico.edu>
Date: Mon Dec 28 2009 - 00:51:26 EST

While the US frittered away much of the stimulus on throwing money at
banks, the Chinese actually created much more capacity. Business Week
used to do a good job of understanding real issues. Here the new
Bloomberg magazine notes that the extra capacity poses a risk to the
West because China will now have to export more, creating a different
sort of imbalance.

Roberts, Dexter. 2009. "China's 'Made in China' Problem: The Downside to
Beijing's Huge Stimulus is a Glut of Factories and Output That May Spur
Trade Frictions." Business Week (21 December): pp. 20-21.

"While Beijing's $586 billion stimulus package has helped the mainland
navigate the global financial crisis, there's a downside. Fixed asset
investment -- money spent on factories, highways, and other big-ticket
projects -- soared 40% in the first half and accounted for nearly all of
the country's growth."

Michael Perelman
Economics Department
California State University
Chico, CA
530 898 5321
fax 530 898 5901
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Received on Mon Dec 28 01:03:51 2009

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