China Unable to Save Us All

The IMF has said that China’s GDP is going to grow 9.3% next year, which is a darn sight better than the UK, whose economy is predicted to actually contract by 0.1%. So with our fairly basic grasp of Keynesian economics, we were thinking that maybe China and India might just drag the world economy out of the mire through their massive spending on construction, finance, tech and so on, creating a kind of New Deal – casting Hu Jintao as FDR and the western world as the itinerant Okies.

But from reading the news today, it looks like this half-baked hope might not pan out. First up we’ve got the chairman of mining behemoth Rio Tinto saying that Chinese demand won’t grow until next year and that they won’t meet their $10bn end-of-year sales target, prompting a 17% drop in their shares. (And their day just got worse with Chinese state-based aluminium company Chinalco having their £8bn stake in Rio Tinto frozen by liquidators, because it was held with those rascals Lehman Brothers. Ouch.)

Then there’s David Philips, a researcher into construction machinery, saying in the FT Companies section that despite India and China being a “bright spot” for the industry, it’s not enough to prevent a 14% annual drop in world sales over the next two years, a trend that will presumably be replicated across the whole manufacturing sector in the coming months.

And despite the flapping mouth of wonderfully-named Filipino president Gloria Macapagal Arroyo, it doesn’t look like a plan to recapitalise and buy up toxic assets in Asia is going ahead yet. We’re all in this together then.

Posted by Ben Beaumont-Thomas in Hot Money | October 16, 2008 12:30PM |