China's slowdown foreshadows global slowdown

Martin Hart-Landsberg writes that China's slowdown foreshadows global slowdown.

China’s recent decision to allow its currency to devalue is one measure of government concern. The government no doubt hopes that the devaluation will jump-start exports and growth but this is unlikely given the general weakness in demand in most markets.

In fact, China’s economic slowdown will itself translate into a deepening global slowdown. As the country’s growth slows so does its demand for parts and components produced in other Asian countries and primary commodities purchased from Latin American and sub-Saharan countries. And as growth in all three regions declines this can be expected to put downward pressure on growth in core countries, especially Japan and Germany, both of whom also rely on an export-led growth strategy.

Emphasis Mine

China still has several ambitous infrastructure projects in the works: trans-continental railways, highways, and pipelines. It definitely has the capital to do these things. The Keynesian pump-priming is still going on.

However, the impending crises in the Chinese economy lie in the housing and stock market bubbles. These are all private investments. Instead of investing in socially sustainable assets, the Capitalists in China chased asset inflation instead.

So, we have a government investment boom in useful infrastructure, while the private boom was frittered away on dreams of wealth.

China is going to learn the hard way that Capitalism is a shriveled ideology bereft of innovation.

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