Date: Sat, 13 Sep 1997 15:04:16 -0700 (PDT)
From: Dennis R Redmond <dredmond-AT-gladstone.uoregon.edu>
Subject: M-I: Re: China's selloff


On Sat, 13 Sep 1997, Doug Henwood wrote:

> I think the capital is both domestically generated and imported from
> abroad. Investment flows into China over the last couple of years have been
> enormous. And it's hard to believe that 10% growth rates sustained over
> several years don't throw off huge wads of profits to be reinvested.

I've just been paging through the sacred multi-folio'd grimoire of
everyone's favorite mouthpiece of the ruling class, the IMF's "Direction
of Trade Statistics Yearbook 1996" (encased not in ivory but in Ye Olde
Acetate -- the overclass is endlessly cheap, comrades) and the figures on
Chinese external trade are eye-popping. Total exports plus exports
rose from $111.6 billion in 1989 to $264.5 billion in 1995, the last year
for which information was available. This is a 15% compound annual growth
rate; Hong Kong, Singapore, and South Korea have all experienced roughly
similar rates of expansion. As China has industrialized, it's moved up the
commodity ladder: in 1989, 11% of total trade was with the US, and 19%
with Japan; in 1995, 15% was with the US, and 22% with Japan. 

Assuming profit rates of 10% on total exports, that's $30 billion in sheer
cash flow to spend on new machinery and domestic investment, which, plus
Hong Kong's FDI flows, and the cash of multis hot to do the 
Beijing trot, goes far towards explaining why China's expansion hasn't
flamed out in a Mexican/Brazilian-style debt debacle. The CCP does seem to
have its fiscal act together: China has been accumulating a mountain of
forex reserve (the latest I heard is somewhere around $100 billion in
T-bills). The speculators can kick around the tiger currencies 
all they like, but when it comes to yanging the yuan, our homeboy Jiang
Zemin don't play that. 

One other thing: Eastern Europe, of all places, is also experiencing a
trade boom. When I first read the stats, my jaw dropped: Poland, Hungary
et. al. may have 15% unemployment and deficits galore, but
their export sector is taking off like a rocket, growing 15-20% from the
depths of 1992. "Holy Warsaw Pact, Batman -- why isn't the IMF trumpeting
this as a triumph of neoliberalism?!" "It might well just be Eastern
Europe's electoral shift to the Left, Robin". Maybe IG Metall really does
know what it's doing, after all.

-- Dennis



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