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China Faces Economic Meltdown in 2013, Says State Researcher

By Gao Zitan
Epoch Times Staff
Created: September 2, 2012 Last Updated: September 7, 2012
Related articles: China » Business & Economy
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The designers work at the design center of Babei Group Co., Ltd on July 3, 2012, in Zhejiang Province, China. An economics researcher in China’s State Council predicts an economic meltdown in the country next year. (Feng Li/Getty Images)

The designers work at the design center of Babei Group Co., Ltd on July 3, 2012, in Zhejiang Province, China. An economics researcher in China’s State Council predicts an economic meltdown in the country next year. (Feng Li/Getty Images)

An economics researcher in China’s State Council, the equivalent of the Chinese regime’s cabinet, predicts an economic meltdown in the country next year. His remarks, which were made almost a year ago, were given renewed attention recently as China’s economy actually begins to slow down and his predictions start to look not far off the mark.

Li Zuojun, a researcher with the National Development and Research Center of the State Council, delivered a speech on Sept. 17, 2011 titled, “Economic Crisis Will Befall China in 2013.” The speech was presented at an internal meeting of the Changsha Alumni Organization of Huazhong University of Science and Technology, according to Deutsche Welle.

Recently the speech has spread widely on China’s Internet.

An Aug. 23 post on Weibo, China’s largest social media site, was forwarded more than 9,000 times. The information was also widely reported by mainland media portals, including Sohu and Sina.

In summary, Li noted that the bankruptcies of small and medium-sized companies, banks, and local governments are all signs of a nationwide economic crisis.

Li gave four reasons for his prediction:

Economic

A bursting real estate bubble and the worsening local debt crises are two causes Li attributes to a potential economic meltdown.

He reasons that the overall economic downturn led to financial hardship for small and medium-sized companies, which subsequently resulted in reduced industrial and commercial tax revenues. Local governments suffered from reduced revenues due to the depressed real estate industry.

Nevertheless, local governments are under a lot of pressure to keep spending more money on items such as national defense, local infrastructure, housing construction and social insurance policies, improvement of hydraulic structures, and, most important of all, “maintaining social stability.”

At the same time, maturity of local debts is adding further pressure and forcing some local governments into bankruptcy. This will inevitably lead to banks also declaring bankruptcy, and debts being passed on to Chinese citizens. As a result, Li predicts a full-blown economic crisis is imminent.

Hot Money

China’s economy is slowing down while the United States is experiencing an economic recovery, therefore large sums of international hot money will flow out of China. This drain will also contribute to an economic implosion, he says.

Political

China’s 2013 leadership transition brings new leaders to the helm that might not be so anxious to address China’s economic woes. Li thinks they won’t expose any of the past problems until three to five months after they take their positions. So, the most likely recognition of an economic collapse, according to Li’s estimation, is July or August of 2013.

“Following the economic bubble bursting, there will be a subsequent period of suffering. But for the new leaders, this is nothing bad, since they are not to blame for the suffering,” Li said.

Furthermore, “With the economic bubble bursting, the new leadership can adopt practical approaches. … New political achievements will be gained more easily, since the starting point is comparatively low.”

Cycles

The valleys of short-term, mid-term, and long-term cycles converge in 2013, Li said.

A short-term cycle spans three or five years. Currently, this cycle is moving downwards and will reach bottom within the next two years, Li said.

A mid-term cycle spans about nine or ten years. According to Li, mid-term cycles in China occurred almost every ten years, in 1949, 1957, 1966, 1976, 1989, and 1998. Li said it has been over a decade since 1998, and the cycle should be around the corner. Initially, this cycle should have arrived in 2008 or 2009. Economic policies at that time delayed the cycle’s valley, but it shouldn’t be delayed for too much longer, he said.

There is also a long-term cycle, which spans 60 years, Li said, giving his speech a traditional Chinese inflection with a reference to the I-Ching, also known as the Book of Changes, a classic Chinese text on divination. From Li’s estimation this cycle is also approaching.

With the economic crisis, social problems will also result. The current intensification of “mass incidents,” or large, often violent protests, can be seen as a forewarning of future turbulence, he said.

Other economists agreed with Li’s presentation.

Mao Yushi, a well-known Chinese economist who advocates free market principles, said in an interview with Deutsche Welle that China has serious economic problems and that “any sudden change” is possible. Economic problems will lead to a plethora of social problems, he said.

Dong Fan, a Chinese economist and professor at a prominent university in Beijing, said he admires Li’s courage to speak.

“The crisis [in China] has long been taking place from the western perspective,” Dong said. “It is only that it has been successfully covered up by the current systems, and the report in April showing an upswing of real estate transactions has made the rather severe economic situation look more favorable.”

Read original Chinese article.

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  • Mombasa69

    Anyone with half a brain could see this happening years ago.


   

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