China’s exports sink, but factory investment rises

China is an export based economy. World trade is plummeting. For as long as China cannot build an internal market  large enough to absorb their astronomical industrial capacity (and there is absolutely no indication that anything similar is happening), any increase in investment in more industrial capacity is deflationary, particularly if it happens by decree. Furthermore, the simple fact that China needs to create 10Million jobs a year just to absorb its graduate population at a time of global credit retrenchment and decreasing trade is… is… well, it is phenomenally deflationary.

Excerpt: “China’s banks issued about 5.2 trillion yuan ($757 billion) in new loans in January-April of this year, heeding government orders to finance infrastructure projects aimed at boosting employment and stimulating demand.


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