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The comparison of China with Japan as stress builds up from overexpansion of credit in the banking system. The sharp increase in credit following the 2008 financial crisis has built up stress in China's banking system. Japan went through a period of low growth and insufficient lending by banks. Banks refinanced bad debts to zombie companies in Japan leading to a long period of low growth. China faces a similiar period of low growth after a credit expansion binge.

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The yuan has risen 14.5% against the yuan in the last 4 months, according to the Chinese Commerce ministry. Loosening the Chinese currency's peg to the dollar will increase the value of the renminbi even further. And with further declines in the euro expected this would seriously affect Chinese exporters to Europe. This also makes European goods more competitive than American goods in the Chinese market putting the Obama's administration's goal of doubling exports further at risk. The Shanghai stock index declined by 5.1% on Monday May 17, 2010, reflecting these concerns. The Chinese government continues to intervene in currency markets and the renminbi is now at 6.827 renminbi to the dollar.

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Global aid to agriculture in developing countries is about $5 billion a year. Mr Obama made the decision to double U.S> aid to developing countries farmers to more than $1 billion ayear in 2010. THe NYT reports that with the G8 meeting in Italy in July, America will spend $3.5 billion dollars over 3 years for helping farmers in developing countries. This according to Michael Fromans, an Obama adminsitration official is going to be new money. As far as the other G8 countries are concerned it could include old money for the total $15 billion committed. Since the worst hit areas for agriculture are in Africa, and Africa has lost a lot of ground in development in the last 20 years, suffering neglect in aid to farmers over 20 years both form the American administrations and their own governments, it is surprising that the amount and the details for where it would go in Africa are not revealed. Mr Obama has grasped the need not just for shipping food assistance from the USA, but need to help farmers. He agrees with ANdrew Natsios former head of Agency of International Development, who says that most of the poorest people in developing countries are farmers and herders living in the countryside, the crux of any effort to improve their lives has to start with agriculture. Obama advocates using the "tried and true agricultural methodfs and technologies that are cheap and are efficient but can have huge impact" in the lives of people. Malawi, is a good example, say Prof. Sachs of Columbia University, as subsidies for fertilizer sharply increased food production. Sachs says it is possible to double or triple food production by giving small-holder farmers access to high yielding seeds, fertilizer and agricultural extension services. But more needs to be done and devloping countries themselves that have made progress like India, China and Brazil can provide their know-how and experts and should have been brought into this, which is another reason why there is no reason for a G-8 summit of countries of European origin. An enlarged organization can bring in the resources and ideas of all the major countries in the world, to especially bear in on Africa, where alot needs to be done. Just to get an idea the UN's Food and Agriculture Organization says the global economic crisis will put another 100 million people into facing hunger this year....

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There is strong cirticism from many quarters about low interest rates as a prime culprit in causing the bubble in housing prices. In comments before the American Economic Association, America's Fed Chairman Bernanke defended his role as Fed governor in 2003 when he along with Greenspan was an advocate of the decision to cut the Fed's target interest rate to 1%, and to leave it here for a year and raise it only slowly. Bernanke says countries like Britain, New Zealand, and Sweden had tighter monetary policy but there home prices rose more, and monetary policy explains only 5% of the variation in home prices. Analysis has shown he says that capital inflows such as those the U.S. received from China and other Asian countries explains 31% of the variation in home prices, supporting a contrasting theory that that its these global imbalances that drove the crisis. He also placed the primary fault for the housing bubble on relaxed lending standards and views that housing prices would rise forever. Alongside these comments Fed chairman Bernanke also said that bank supervisors and other financial regulators of which the Fed was one, has a better ability to contain the excesses that led to the economic crisis including housing bubble and other excesses, than the Fed as a monetary policy maker. By saying this Bernanke is acknowledging that the failure of regulation was a key part of what happened in the economic crisis. The failure to fix the regulatory system even now leads Bernanke to say that he is open to using monetary policy as a supplementary tool for addressing risks should another bubble develop, if the regulatory system isn't reformed. Still Bernanke and Greenspan were quite complacent at the time of the low interest rates and did not point out the dangers of global capital imbalances which were evident at the time, preferring to say that the United States could benefit from the inflows of capital from overseas without serious risks. And the Fed did not exercize its role of vigilance in alerting the country to excesses in the way the housing industry operated and in exercizing its own powers to that effect. Instead the Fed as regulator and in role as asafeguard for serious risks let itself become part of the cheering section as the worst excesses in housing were being exposed....

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How ArvinMeritor navigated the treacherous waters of the automotive parts buzsiness since 2000 when the company was formed taking in the automotive business of Rockwell International in Troy, Michigan. The combination was designed to bring the automotive parts business for roof and door systems, chassis and wheel products with the comercial truck business which makes drivetrain systems and components like axles, drivelines and braking systems. The business is in turmoil and ArvinMeritor last recorded a profit in 2005. Here is how they did it. First, the combination provided some linited diversification for the cyclicality of the automotive business passenger cars and trucking together. By 2004 the foreign makers especially the Japanese were taking market share from the Detroit Big Three car makers which only accelerated after that when the Big Three overconcentrated on SUV's and had no competitive car lineup to match the Japanese in 2007 and 2008. The Big three closed plants and companies like ArvinMeritor closed plants also. In the last couple of years first GM and then Ford began to emphasize emerging market countries like China, Russia, Brazil and India. Wagoner GM's CEO in citing improved results in 2008 specifically referred to the $500 million profit in Brazil as making this possible. He also said that when investors see the improved results so early they are forgetting that the model that GM has setup has changed completely from the model that investors were used to in previous years which was a large and growing US focussed market base. Now its a global focussed market base with particular focus on emerging markets. ArvinMeritor has followed this pattern and set up parts plants in new countries like Russia to supply the Big Three's plants there. But it appears from Phil Martens, Arvin Innovation's CEO's statement that only 20% of global automotive sales for ArvinInnovation, the automobile part of the busines that is being setup as a separate company, are coming from the Big Three of Detroit. And 65% of the sales are coming from outside North America. Which suggests that 15% of sales are coming from the foreign carmakers in North America. ArvinMeritor closed 11 plants in North America and the new company Arvin Innovation has 42 facilities in 16 countries with sales of $2.2 billion in fiscal 2007. ...

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A local government vehicle in China, Sixth Division of XPCC fails to make a bond payment in August 2018. This is the first such instance of failure to make a bond payment for a local government vehicle in 2018. Economists estimate China's total debt at 242% of GDP in 2017, and government efforts to tighten liquidity and reduce support for overextended local government investment vehicles.

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The Dutch had their tulip bubbble, the Chinese have their Pu-er tea bubble which has just burst. It was a pure speculative bubble with speculators cornering the market and bidding up the price of tea in Yunnan province on the Burmese border. From 1997 to 2007 the price of these green tea leaves from Yunnan- that make a fermented brew called Pu-er- wentup from $15 to $150 a pound. Actually a group of manipulative buyers drove prices up. Production doubled from 2006 to 2007 to 100,000 tons. Unlike other teas this tea is said to grow better with age and is packed into compressed cakes for transport. Now prices of this tea have collapsed to $3 a pound. Russia had its own experiment with unbridled capitalism, now China is struggling with the effects of the aftermath of its own unbridled capitalism.

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China's limited monetary and fiscal options in 2012, with the housing bubble limiting the option of increasing construction spending to spur growth, and inflation limiting monetary policy. The central bank's decision to reduce the reserve requirement by 0.5% is not expected to do much for economic growth, as there is enough money to lend. The problem is that there is not enough demand for loans in the current environment.

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The People's Bank of China's decision to reduce the reserve requirement for deposits at banks by 0.5% is not likely to have much impact, as banks already have enough money to lend. The problem is more a lack of demand for loans as the economy slows. Inflation fears restrict the use of growth tools such as lowering interest rates and the housing bubble limits the use of construction spending to increase growth. Political uncertainty with a leadership transition, and economc uncertainty in Europe also limit options.

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China's GDP growth of 8.7% for 2009 is based on private sector investment in housing and infrastructure spending through the stimulus funds. Now with a asset price bubble developing from excesssive lending in 2009 the government is trying to slow bank lending. Experts see a situation similiar to Japan, as an asset price developed there in the 1980's after rapid industrialization. Even though China will still be a developing country after this phase of growth. Property prices are going up by 20% a year in the major cities. And with it making housing unaffordable for most people except the top 20% of the people who comprise about 120 million. This raises issues of equitable growth for Beijing. Much of the rest of the country is being left behind when it comes to housing and in other areas like health care.

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The Guangzhou to Wuhan train high speed line covers the 664 mile trip in 3 hours. 42 such high speed rail lines are set to open by 2012. These trains run at 215 miles per hour. Original plans were to build these lines by 2020 but the global economic crisis led to state planners moving the date up to 2012 and allocating $100 billion for this purpose. Moving passenger traffic to high speed rail lines also frees up the existing lines for more freight. Plans are to build an additional 3000 miles of track for passenger and fast freight trains at 155 miles per hour. Practically every seat on the Guangzhou- Wuhan 14 car train was full on a typical day last week, filled with migrant workers going home. What makes building these lines affordable is construction workers who earn less than $100 a month, a national savings rate of 40%, and rising tax revenues.This particular line cost $17 billion to build because of the many tunnels needed for the line. The three hour train actually makes the journey faster than the 2 hour flight to Wuhan from Guangzhou because of faster check-in times. Train stations are built in industrial districts away from the city, in the case of Guangzhou, a 40 minute bus ride from the city....

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The appointments to key economic positions in the Jinping-Keqiang administration in 2013 reflect continuity and importance given to experience. Zhou Xiaochuan continues as head of the central bank PBOC, to keep an experienced person in the the event of a financial crisis. Lou Jiwei, chairman of the sovereign wealth fund, is now the new finance minister. Xu Shaoshi, minister of land and resources, is the new head of the National Development and Reform Commission, the economic planning agency. Xiao Gang, chairman of the Bank of China, one of four state owned banks, will be the new head of the securities regulator, China Securities Regulatory Commission. Zhang Gaoli, a member of the Political Standing Committee of the Communist party, and Wang Yang, party chief of southern Guangdong province, also join the economic team. Li Keqiang, the new prime minister emphasized the agenda for the next decade telling a press conference: "Talking the talk is not as good as walking the walk. We need to pursue market oriented reforms." This means giving the private sector and consumers a signficant role in the Chinese economy....

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China announced that it would make its exchange rate flexible, but also emphasized that it would do so gradually. What this means is that China will have a managed floating exchange rate. China followed a managed floating policy between mid 2005 and mid 2008, with a 21% upward valuation during that period for the yuan. During the 2008 crisis upto now the rate was pegged. The yuan was pegged at 6.83 yuan to the dollar. China is now rebalancing its economy so that it is not overly dependent on exports. The idea is to let domestic wages and domestic consumption pick up the slack in the markets of Europe and the USA. Europe is taking up austerity measures, and the mood in the US is shifting towards concern about growing budget and trade deficits. See the groups for "China wages" and "China workers."