Blame China, say Paulson and others

Hank Paulson has an interesting take on the international economic crisis (from Bloomberg, via blazespinnaker in this iTulip thread):

In a sign the administration doesn't accept full responsibility for the world's woes, Paulson said yesterday that while the U.S. is ``well aware and humbled by our own failings,'' it wasn't alone in making mistakes. The ``lack of consumption and accumulation of reserves in Asia and oil exporting countries and structural issues in Europe,'' also hurt the global economy, Paulson said.

My emphasis. Right, so it's those lesser breeds without the law who are to blame, 'cuz they're not spending like drunken sailors the way good ol' Americans would when they come into some cash.

There seems to be a lot of "blame China" sentiment out there lately. Look at this one:

It wasn't that long ago that pundits were counting on China to rescue the world from economic calamity. Now, China may be poised to become a key source of the problem.

After a recent visit to China, Nobuyuki Saji, chief economist and equity strategist for Japanese investment bank Mitsubishi UFJ Securities, issued a report warning that China could be on the verge of pushing the world into a deflationary spiral. The problem? Swelling industrial overcapacity, which threatens to undermine prices both for China's exported goods and its imports of raw materials.

He estimated that China's production is running as much as 50 per cent below capacity, as many industries that have been expanding rapidly are now being hit by slowing demand both domestically and abroad. Based on his estimates, China alone represents 7 per cent of the global supply/demand gap.

"We believe that once Chinese companies start to fully factor in a 2009 recession in the global economy in terms of significant shipment and selling-price cuts, widespread global deflation will be inevitable," he said.

From the Globe and Mail, via bugsybrown. Expect to see a lot more of this in the near future.