CHINA LACKS A FUNCTIONING CENTRAL BANK

I’ve written previous Blog Posts about the fact that China isn’t the raging economy that some people think. Yes, its growing faster than most Developed Countries; but, that is because it is still starting from a bare bones point. And, although it is the second largest, by GDP, that is because of the sheer number of Chinese: buying chickens at the market; TVs; bowls of noodles from street vendors; etc. On a GDP-per capita basis, its numbers drop considerably. Remember, also, that most of its production is still in the low-end of the production cycle, and largely for export, rather than for domestic consumption.

The linked article, from the NY Times, points-out the many inconsistencies in: it’s below market interest rates; most of the credit being directed toward state-run businesses; corrupt practices of preferential availability and interest rates to Party leadership. The article is linked, as follows: http://www.nytimes.com/2013/12/28/business/international/china-in-push-to-rein-in-lending-practices.htmlpagewanted=2&ref=economy&pagewanted=print. Shadow banking is quite rampant in China, also unregulated and out-of-control.

Now, surely no one would try to claim that our FED, or other major Central Banks are perfect. They all have to deal with the Special Interests that are involved in various political entanglements; however, they do seem to know which direction they should move their respective economies in and, at least, they seem to be moving in the right direction. The same cannot be said for China. That’s a real problem for Centrally-Managed Economies.

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