[lbo-talk] The Danger of Overcapacity

[michael perelman]

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. 
http://www.businessweek.com/magazine/content/09_51/b4160020918482.htm?chan=magazine+channel_new+business

"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
95929

530 898 5321
fax 530 898 5901
http://michaelperelman.wordpress.com