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China's "Illusion Of Prosperity" Exposed: Forget Ghost Cities, Meet Ghost Factories
Having exposed the 20+1 charts of China's demise previously, we move to Exhibit (a) in the "illusion of prosperity" that keeps the dream (looking) alive to the outside (mostly Western get-rich-quick fast-money) world - China's Zombie Factories...
“There are large numbers of companies across China that should go bankrupt but haven’t done so,” says Han Chuanhua, a bankruptcy lawyer at Zhongzi Law Office, a Beijing legal practice.
“The government doesn’t want to see bankruptcy because as soon as companies go bust, unemployment spikes and tax revenues disappear. By stopping companies from going bankrupt, officials are able to maintain the illusion of local prosperity, economic growth and stable taxes.”
Here's Reuters from earlier last year...
This 'pretense' is occurring everywhere across the vast expanse of China, as The FT reports, similar experiences are playing out, with thousands of companies in heavy industrial sectors plagued by chronic overcapacity that should be going bust instead being propped up by local governments.
In the shadow of a group of enormous smokestacks and abandoned foundries, a peeling sign welcomes visitors to the Wenxi Steel Industrial Park.
But in the nearby village, the working-age men and many of the women have gone, leaving only the elderly and the very young.
“If you cut down the big tree, all the small trees around it will die,” says 69-year-old Wang Peiqing, referring to the collapse of Highsee Iron and Steel Group, which operated the foundries before its recent closure devastated the economy of a once-prosperous corner of Shanxi province in central China. “The entire region relied on the steel mill; now the young people have to go and look for work across China.”
Highsee stopped paying its 10,000 employees six months ago. Local officials estimate the plant supported indirectly the livelihood of about a quarter of Wenxi county’s population of 400,000. Highsee was the biggest privately owned steel mill in Shanxi, accounting for 60 per cent of Wenxi’s tax revenues. For those reasons, the local government was reluctant to allow the company to go out of business, even though it had been in serious financial difficulties for several years.
“By 2011 Highsee was already like a dead centipede that hadn’t yet frozen stiff with rigor mortis,” says one official who asks not to be named because he was not authorised to speak to foreign reporters.
“More than half the plant shut down, but it was still producing steel even though its suppliers wouldn’t deliver anything without cash up front and it was drowning in debt.”
It was only last month, four years after Highsee began to flounder, that the company was finally allowed by the government to initiate bankruptcy-proceedings.
“The government’s plan is to sell off the plant quickly and restart production just like before, even though the steel market is in such bad shape,” says an official who asks not to be named.
“The problem is that it owes at least Rmb10bn [$1.6bn] and probably much more than that. We don’t know where we’ll find someone who can pay all that off.”
* * *
Some of the zombie factories... (Source: Reuters)
In the past month alone Chinese media have reported on at least nine large steel mills that appeared to be suspended in limbo after halting production but which are forbidden from going formally bankrupt.
The outstanding volume of non-performing loans in the Chinese banking sector has increased 50 per cent since the beginning of 2013, according to estimates from ANZ, the Australian bank, but the sector-wide NPL ratio remains extremely low, at just over 1.2 per cent.
In private, however, senior Chinese financial officials admit the real ratio is almost certainly much higher, obscured by local governments trying to prop up companies.
* * *
But apart from that... sure buy Chinese stocks, because well, they are going up...
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I think I will drive around America and take photos of the abandoned steel and auto mills and write an article. How many steel mills are left? Not worth counting.
Here:
http://en.wikipedia.org/wiki/Steubenville,_Ohio
I have driven around America, and the rural areas are a vast wasteland. There's so many "ghost" factories that I almost don't notice them any more.
meh, USA has it's Rust Belts.
Repost:
15.5% Bankruptcy Rate per person over 20 Years for US Citizens (Snapshot in Time).
What does ZH Think about the Cost of Living, Jobs, Economy, and Health Care in Light of this???
1.7 Million People in US will Face Bankruptcy this year due to Medical Bills (Jim Cramer). 147 + 98 = 245 M working aged. 1.7 M / 245 M = .69% Bankruptcy Rate per year per person Minimum. A US Rate of .77% Bankruptcy rate per year per person is reasonable based on 1.7 M / 219.6 M aged over 25 years old.
20 Years Rate = 1.7 * 20 / 219.6 = 15.5% Bankruptcy Rate per person over 20 Years.
http://www.amednews.com/article/20130708/business/130709932/6/
http://www.debt.org/bankruptcy/statistics/
http://www.infoplease.com/us/census/data/demographic.html
http://quickfacts.census.gov/qfd/states/00000.html
- 60% of bankruptcies are due to medical bills.
- Younger patients had two to five times higher rates of bankruptcy than cancer patients 65 or older.
- Since the early 1990s, bankruptcy has been used with increasing frequency by older individuals. While more senior citizens are declaring bankruptcy, a decreasing percentage of filers are younger than 25.
------------------------------
---- Bankruptcy Rate --------
------------------------------
115.6 million = Total Households
2.63 people per Household
74.3 Million people under 18 years old
244.7 Million people over 18 years old
99.4 Million people under 25 years old
219.6 Million people over 25 years old
319 Million = Total Population (FRED)
245 Million = Total Population over 16 years old (BLS)
147 Million = Total Employed (FRED & BLS)
92 Million = Total Not in Labor Force (FRED)
98 Million = Total Not in Labor Force (BLS over 16)
Active Population: Aged 25-54: Males for the United States©
2013: 53,964,000.00000 Persons (+ see more)
Annual, Not Seasonally Adjusted, LFAC25MAUSA647S, Updated: 2014-02-05
http://research.stlouisfed.org/fred2/series/LFAC25MAUSA647S
More illusions
E.U. Fund Helps Poland Build ‘Ghost’ Airports…….Like China
The Illusion of Chinese Power
http://newworldorderg20.wordpress.com
Those must be the factories where all the shit in Walmart is made LOL.
“There are large numbers of companies across China that should go bankrupt but haven’t done so,”
Just like GM and the too big to fail and jail banks!
The USA does the same with car manufacturers and banks.
China will be fine I think. They will have no need for Western paper, currencies, and they have the highest ratio of gold and silver on Earth, which ensures that their currency will be worth a lot afterwards, which means they will have a lot of purchuasing power, which means the going markets in Europe and USA shall be somewhat substituted by that fact. And there is also an integration with Russia on the the way, so China should be fine. China is also a homogeneus society, and homogeneus sociaties always a lot easier overcome any difficulty. Western sociaties are, on the other hand, a total mess -- a product of a hundered yrs old Zionist rape, and there will be a lot of unwinding there. Hopefully, we shall have the European America, African America, and Zionist America, and European America will cover most of North America! Hopefully European America gets better part of today USSA and most, if not all, of Canada! That is, I think, something to wish for.
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Okay, the factory pics there are obviously 10+ years old. Go to any factory town or ex-factory town in the US and you will see the same thing.
Go tell the Chinese officials you want to take some pics of the site or just wing it and don't ask permission. See where either choice gets you...
Four of them photos looked like they were of the same place, but I could be wrong. Have a closer look. Waddya reckon?
Not saying I disagree with the article. Just looking at the photos. Could always add "All them Asians look the same to me" joke here.
“The government doesn’t want to see bankruptcy because as soon as companies go bust, unemployment spikes and tax revenues disappear."
Seems to be a good lesson for the u.s government that allows it's production and high quality jobs to be off shored, course the exceptional nation can just print up it needs.
First thing to do, is to stop refering to yourself as "Americans." Europeans are not Americans. Americans are those native Indinas which today make less than dwarf's populace in USA. Then, satrt organizing around Europen banner, and start taking the power away from the Zionists. Then you give one or two states to Africans (I suggest giving them California and parts of Nevada and Arizona -- those parts which are going to be transformed into desert regardless; you know that Las Vegas is bult in desert and has no future, don't you? The desert will claim all those unnatural constructs which Las Vegas certainly is -- it's only a matter of time). Give Zionists Washinton, New Your and that region - is it Beltway you call it? - and be done with it. Return to Constitutional money (gold and silver), and make European Confederation of States. Restore your Republic, this time divorced from Zionists and Africans.
// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })(); // ]]>// '; filtry.appendChild(div); }); })();]]>Sounds like a plan to me!
What do a few pictures of a failed company prove? This looks like propaganda to me.
Companies go bankrupt all the time, and of course it's not uncommon for governments to attempt to prop them up for a while. The relevant questions are:
- Is the economy able and allowed to adjust by redirecting resources to more productive activities?
- Are the workers thus released able to find and/or create meaningful work?
If so, then difficult times are unlikely to last. Fact is that there is no "unemployment" in China, principally because the barriers to entry for entrepreneurs are extremely low. But even for dependent "paid" employment, there is no sign that the great job generation machine has ceased to function. Yes, there was a definite recession in the first half of 2014, but that is a standard part of the Keynesian business cycle. Western observers often forget that Keynesian business cycles do not necessarily doom an economy to stagnation; what they do cause is resource misallocation and cyclical downturns. And this is exactly what we saw in China in 2014.
The scam can't go on forever. The Federal Reserve's infinite model eventually runs out in a finite world. Same for the Chinese.
Are those photos of Bridgeport Connecticut or Detriot Michigan?
These empty cities and factories are the 'collateral' for trillions in outstanding loans - the proceeds of which are going into stawks and yet moar empty cities and factories!
In a centrally planned economy, you wonder if this is ineptitude, or if there is some massive re-location plan that will require those empty cities and factories?
These empty cities and factories are the 'collateral' for trillions in outstanding loans - the proceeds of which are going into stawks and yet moar empty cities and factories!
In a centrally planned economy, you wonder if this is ineptitude, or if there is some massive re-location plan that will require those empty cities and factories?
Resembles Detroit. The same stuff.
Our govt won't let fnm fre go bust or let most cities go bust, look at the bad debt bomb they left with Detroit, they jettisoned the local workers, then dumped billions of bad infrastructure debt on the people they fired.
Detroit went bankrupt then assumed liability for billions in bad debt.
Americans can't even go bankrupt even in bankruptcy.
Ask yourself this real question instead: Is this better or worse than wasting trillions on killing millions around the world each year?
OK, so you show pictures of abandoned factories and that is proof that China's demise is imminent? Pictures from Reuters no less. If they are as reliable as Reuters Middle East coverage, well, believe what you want. There are many web pages showing abandoned buildings and factories in Detroit, Cleveland and all over the US, does that mean the US is going to collapse? Well, it might, but not because of a few abandoned factories. As for the gubment propping up companies, do you think Northrop Grumman, Lockheed Martin, General Dynamics, Raytheon, etc. would be in business without gubment subsidies? Not to mention corn farmers, auto makers, etc. Is ZH posting articles written by the White House now? This article should be in Forbes.
I don't know how bad things are in China but I agree with your position that showing pictures of empty factories proved nothing. Time and Newsweek in their heyday were great hands at this. Want to show Country A is doing brilliantly? Interview people who think the same and show pictures of gleaming new factories and offices.
But a quick call from HQ tells you that actually we want to show the country as f*cked. So then throw out what you have and instead select out a few naysayers (you'll always get people on both sides) and show pictures of closed down factoies and derelict building, which again you can find anywhere.
QED.
All hail the MSM.
by this standard the usa collapsed in the 70s.
Thats why we are zombies. We are the walking dead, living on borrowed time and money.
"Ghost factories" are simply the central-planning socialist version of speculative house building.
And how is a city that is proped up by welfare and subsidy any different? (looking at you, Detroit, Flint, Atlantic City).
Those arnt ghost factories. They are just getting ready for WWIII!