La Times:
China's economy appears to be  weakening more  rapidly than official statistics would suggest, raising fears of  a painful  slowdown that could be felt around the globe. Second-quarter gross domestic product statistics to be released this week are  expected to show growth of around 7.5% compared with the same period last year,  according to analysts' estimates. That would be the slowest pace since the  depths of the global financial crisis. But government data are widely believed   to understate the extent of China's woes.

Other indicators point to a much sharper decline, economists said. Record  amounts of coal and iron ore are piling up at depots, signaling waning demand   for electricity and building materials. Excavators and other heavy equipment  are  being idled or sold at deep discounts as housing construction has stalled.  The  demand for diesel, needed to power those machines, has been flat for six  months.  Shipyards have laid off thousands of workers and half-built vessels have been  left to rust.

Industrial data point to a decline that government growth figures wouldn't  fully reflect, according to economists who are downgrading their forecasts.  Local officials throughout China are suspected of padding growth estimates to  meet targets set by Beijing to boost their chances for promotion.

"Recent economic data, including steel production and corporate profits, have continued to weaken visibly," said Yiping Huang, an economist for Barclays.  "There is a renewed perception that the real economy is much weaker than is suggested by official statistics."

Those, lke the Economist magazine, who see China as not dependent on exports and growing at over 7.5% for the forseeable future are finding it increasingly difficult to maintain their mental models. I have been pointing out that Chinese economic numbers are bullshit since 2007.

Pettis:
Recently  the Economist had an article arguing that China is not overinvesting,  it is, they claim, malinvesting.  I am not sure that I fully understand the  distinction, but I do not think it is meaningful in the context of this debate. 
That's what I said (I was not as tactful).

More:
So China has probably hit both constraints – capital is wasted, perhaps on an unprecedented scale, and the world is finding it increasingly difficult to absorb excess Chinese capacity.  For all its past success China now needs urgently to abandon the development model because debt is rising furiously and at an unsustainable pace, and once China reaches its debt capacity limits, perhaps in four or five years, growth will come crashing down.


Similar comments in Hugh Hendry's April Eclectica letter.

Here is what I think the Chinese economy will look like over the coming years.

The Economist has hit the trifecta of stupid on its last three covers. I am starting to wonder if their writers are some Ayn Randish - Stepford Wives type clones. At very least the magazine seems to be turning into a corporate whore.

Think I am exaggerating?
Their cover for their print edition, May 12-18th, shows a picture of Achilles voting with the caption Europe's Achille's heel.

"If a majority of Greeks again vote to reject the spending cuts and reforms that go with their country’s bail-out, then euro-zone governments—in particular,  Germany’s—will face a drastic choice. Mrs Merkel will either accommodate Greece and swallow the moral hazard of rewarding defiance or, more likely, stand firm and cut the Greeks adrift."

The problem is not democracy or that European voters are rejecting austerity. At some point if you are going to anally rape me I am going to figure it out and resist. I may be asleep when the rape starts, but given your actions, unless you club me unconscious, I am going to wake up. The problem is that the austerity adjustment mechanisms will require sustained high
unemployment and will destroy the wealth of the middle class.

To quote Pettis on Spanish adjustment:
 
How  will we deal with the rising debt burden?  Typically we do so by confiscating  the wealth of small and medium enterprises or by confiscating the savings of the middle classes, and usually we do both. 

I am pretty sure that the middle class taxpayer in the European  periphery knows who's benefit the austerity measures are for - Germany's. 

With respect to their latest cover on China. How strong is China’s economy?

"Until recently most economists believed that China was heavily dependent on exports. But it has carried on growing even as its current-account surplus has  shrunk, and trade has subtracted from growth, not added to it. The country is undoubtedly investment-dependent, but its biggest problem is malinvestment not overinvestment. Most people believe that its past malinvestment will impede  future growth. This special report has raised doubts about that. Clearly China  would be better off had it not wasted so much capital. But if the capital stock  is not as good as it should be, that gives the country all the more room for  improvement.

Wrong on sooo many levels. Yeah, when you "invest" in millions of units of housing that are empty then this is both a misallocation of capital and an overinvestment of capital. You have lit money on fire. This money is gone forever. Also, "The Economist" provides no hope or insight as to why a flawed investment process (driven by corrupt SOEs) will do better the next time around.

Here is Jim Chanos on China's debt

Then their cover showing public companies as an endangered species. Woolly mammoths with brands like Facebook going over a cliff.

 They begin the article:
"The number of public companies has fallen dramatically over the past decade—by  38% in America since 1997 and 48% in Britain. The number of initial public offerings (IPOs) in America has declined from an average of 311 a year in
1980-2000 to 99 a year in 2001-11. Small companies, those with annual sales of less than $50m before their IPOs—have been hardest hit. In 1980-2000 an average  of 165 small companies undertook IPOs in America each year. In 2001-09 that
number fell to 30. Facebook will probably give the IPO market a temporary boost—several other companies are queuing up to follow its lead—but they will do  little to offset the long-term decline."

So they pick, as the reference point, the 20 years of one of the  biggest bull markets in history (that contains the dot com bubble) and compare it with a bear market that contains the popping of the dot com bubble, the fraud scandals like Enron, and the Great Recession. Wow, are you intellectually dishonest.

They end the article with a free market bromide:
"Public companies built the railroads of the 19th century. They filled the world  with cars and televisions and computers. They brought transparency to business life and opportunities to small investors. Because public companies sell shares to the unsophisticated, policymakers are right to regulate them more tightly than other forms of corporate organisation. But not so tightly that entrepreneurs start to dread the prospect of a public listing. The public company has long been the locomotive of capitalism. Governments should not derail it."

With the way the Facebook IPO was handled does “The Economist” still think the problem with IPO’s is too much regulation?

I am sorry,  but this magazine is turning into FOX News.




 

From March 31-April 6 Edition -Charlemange Still Sickly
"A big problem is that the euro zone is only partly integrated. Its members  have given up economic tools, such as currency devaluation and monetary policy, yet lack “federal” instruments to cope with shocks. The problem is not so much  the budget deficit (though Greece was certainly profligate) as the net foreign borrowing by all actors, public and private (say to finance a trade deficit). The euro zone has only small internal transfers, and its workers tend not to move far for work. Fiscal stimulus is impossible for most governments, given their indebtedness. Structural reforms to promote growth can take years to work.

So redressing the imbalances must come through “internal devaluation”: bringing down real wages and prices relative to competitors. This was easier before 1991, when inflation around the world was higher, but has rarely been  achieved since then (Hong Kong is one exception). With the ECB determined to keep inflation at around 2%, internal devaluation brings severe recession, even depression. And falling GDP wrecks the debt ratio."

They go on to say that all remedies that would avoid a depression require Germany to bear the blunt of the transition costs, which it is unwilling to do.

Exactly.