Today, an article published on the Bloomberg website entitled 'China Factory Output Rises 19.2%, More Than Forecast' has left me rather confused about the state of the global economy.
In the opening paragraph it is written that the unexpected rise in 'factor output' signals "a strengthening recovery in the world’s third-biggest economy." However there are some rather odd assertions throughout the rest of this article.
China is experiencing deflation. "Producer prices fell 2.1 percent last month from a year earlier, after dropping 5.8 percent in October." Not to worry, the problem of deflation has been solved by higher food and energy prices: "Food and energy price increases helped to bring deflation to an end, said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong."
China suffers from inflation. "Consumer prices rose 0.6 percent." AND "Property prices in 70 cities rose at the fastest pace in 16 months in November and the benchmark Shanghai Composite Index has jumped almost 80 percent this year." AND "The government last month approved increases of as much as 8 percent to gasoline, diesel and jet fuel prices and raised retail power charges for the first time in 16 months."
There is economic growth but it has come from the Chinese Government printing money and from a general increase in debt. "A $586 billion stimulus package, record bank lending and incentives for purchases of cars and home appliances are supporting industrial output.."
There is overcapacity in certain sectors such as steel. But (in another article about Australia's current jobs boom: "BHP Billiton Ltd. [will] take on more workers to increase iron-ore production amid a surge in China’s demand for steel."
There is a global climate change catastrophe playing out in the context of an equally alarming world shortage of energy. However, "Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, said last month that it will build a new factory worth 5 billion yuan to tap an auto market set to overtake the U.S. as the world’s largest this year."
Is there a creeping realisation that governments haven't fixed the problems arising from the global financial crisis? Governments have just increased the level of debt on top of the existing unsustainable levels. Finance is being directed into the production of more unsustainable oil guzzlers. Inflation + deflation equals 'stagflation'.
Whew! Global limits to growth can't be wished away by printing money and churning out more cars. Mass production, on the other hand, can't survive without large quantities of goods being produced to provide for the certain and regular demand that is essential to capitalism.
It's capitalism or us, I guess.