05-11-2019, 12:41 PM
** 02-May-2019 World View: China's economy frays as it closes 'zombie' companies
Readers may recall that 8-10 years ago there were lots of stories
about huge "ghost towns" in China -- towns that had been constructed
with hundreds of homes, as well as stores, schools, hospitals and
various amenities. The only problem is that there were no people
living in these towns. China's government had funded the construction
of these towns just to provide jobs.
In order to fend off the financial crisis, China launched a $600
billion stimulus program. Through its system of regional banks, the
program provided cheap loans not only to build the ghost towns
described above, but also to fund thousands of state-run industrial
enterprises, including steel, aluminum, cement and coal producers.
Just as the real estate construction turned into "ghost towns," the
business loans turned into "zombie businesses."
These businesses have not made any profits because they have no
incentive to do so. Making profits requires developing new products,
entering new markets, and risking failure in other ways. But if
you're going to be bailed out by the government anyway, why do
anything risky, that might call attention to yourself? Another
possible name for these "zombie businesses" might be "Solyndras of
China," a because the Obama administration funded Solyndra, a zombie
company making solar panels before it quickly went bankrupt.
There are something like 10,000 of these zombie companies in China.
Each one might have tens of thousands of employees, with a bloated
bureaucracy producing products that nobody wants, and creating a new
debt crisis as China has to provide more and bigger loans to keep them
alive.
China has shut down 1,900 of them, and wants to shut them all by 2020.
But each time one is shut down, all the employees become unemployed.
China's economy already weakening, and closing 9,000 zombie companies
could trigger a major new financial crisis.
This is one of the possible scenarios that could lead to war. From
the point of view of Generational Dynamics, China is overdue for a
major rebellion and civil war. A major financial crisis within China,
and the Chinese Communist Party (CCP) would redirect towards an
external war, probably with Japan.
--- Sources:
-- Frayed nerves as China kills off its zombie companies
https://www.dw.com/en/frayed-nerves-as-c...a-48013707
(Deutsche-Welle, 21-March-2019 )
-- China's 'zombie' firms weighing on economy
https://www.thenational.ae/business/econ...y-1.835162
(Reuters, 10-Mar-2019)
-- China’s Zombie Firms Can’t Lurch Forever
https://foreignpolicy.com/2018/03/14/chi...h-forever/
(Foreign Policy, 14-Mar-2019)
Readers may recall that 8-10 years ago there were lots of stories
about huge "ghost towns" in China -- towns that had been constructed
with hundreds of homes, as well as stores, schools, hospitals and
various amenities. The only problem is that there were no people
living in these towns. China's government had funded the construction
of these towns just to provide jobs.
In order to fend off the financial crisis, China launched a $600
billion stimulus program. Through its system of regional banks, the
program provided cheap loans not only to build the ghost towns
described above, but also to fund thousands of state-run industrial
enterprises, including steel, aluminum, cement and coal producers.
Just as the real estate construction turned into "ghost towns," the
business loans turned into "zombie businesses."
These businesses have not made any profits because they have no
incentive to do so. Making profits requires developing new products,
entering new markets, and risking failure in other ways. But if
you're going to be bailed out by the government anyway, why do
anything risky, that might call attention to yourself? Another
possible name for these "zombie businesses" might be "Solyndras of
China," a because the Obama administration funded Solyndra, a zombie
company making solar panels before it quickly went bankrupt.
There are something like 10,000 of these zombie companies in China.
Each one might have tens of thousands of employees, with a bloated
bureaucracy producing products that nobody wants, and creating a new
debt crisis as China has to provide more and bigger loans to keep them
alive.
China has shut down 1,900 of them, and wants to shut them all by 2020.
But each time one is shut down, all the employees become unemployed.
China's economy already weakening, and closing 9,000 zombie companies
could trigger a major new financial crisis.
This is one of the possible scenarios that could lead to war. From
the point of view of Generational Dynamics, China is overdue for a
major rebellion and civil war. A major financial crisis within China,
and the Chinese Communist Party (CCP) would redirect towards an
external war, probably with Japan.
--- Sources:
-- Frayed nerves as China kills off its zombie companies
https://www.dw.com/en/frayed-nerves-as-c...a-48013707
(Deutsche-Welle, 21-March-2019 )
-- China's 'zombie' firms weighing on economy
https://www.thenational.ae/business/econ...y-1.835162
(Reuters, 10-Mar-2019)
-- China’s Zombie Firms Can’t Lurch Forever
https://foreignpolicy.com/2018/03/14/chi...h-forever/
(Foreign Policy, 14-Mar-2019)
