Coatings World - October 2013

China’s manufacturing industries are also heavy users of oil. With China’s domestic oil production pegged at about 3 million barrels a day and growing slowly, that means it has had to escalate oil imports to satisfy demand – a situation that is projected to continue for the remainder of this decade.

As it turns out, China’s growing oil need is directly affecting the U.S. and its consumers because it now has a major and growing influence on the price of oil and other critical commodities.

As you might expect, this remarkable economic growth over the past three decades by China has not been achieved without creating some serious internal financial and other problems along the way. Pollution inside China is at a dangerous level. Many of us recall the air pollution during the Olympics. Almost daily there are reports of health related issues as a result of pollution sources. The global economic crisis that began in 2008 has greatly affected China’s economy. China’s exports, imports, and FDI inflows declined, GDP growth slowed from its 10+ percent level to just over 7 percent, and millions of Chinese workers lost their jobs. The Chinese government immediately responded by implementing a $586 billion economic stimulus package, loosening monetary policies to increase bank lending, and providing various incentives to boost domestic consumption. The economy quickly bottomed out, and the rebound saw a quick recovery. The recovery not only sustained the Chinese economic miracle, but also sparked debate about the so called “China Model” among many economic theorists. They wondered what kind of system and cultural codes are hidden behind the myths of seemingly never-ending economic growth.

Unfortunately, what the world found out was that China had not discovered the secret to never ending economic growth.

As predicted by a number of global economists, a rapid decline
began after the central government made a gradual reduction of
the stimulus. We saw a somewhat similar happening in the U.S.
when the Federal Reserve announced a possible end to the QE
program. The decline in China was in fact too rapid for the com-
fort of major policy makers. In the first quarter of 2012, Chinese
macroeconomists proposed the policy of “steady growth.”
Some years ago, the Chinese government changed its policy
and allowed people to buy their own homes and with that change
the flood gates opened. In order to keep the fledging middle class
resurgence alive and robust the Chinese government has spent
over $2 trillion dollars to build whole cities for use by the Chinese
public. Unfortunately, with the downturn in the global econo-
my, these cities have become “ghost cities” with no inhabitants.
Chinese officials have reigned in this problem regarding more
construction and expansion but the vacant cities still exist.