The ultimate insult to China

[Taro Toporific]

How China’s Economy is Following in Japan’s Zombie Footsteps
The Daily Reckoning Australia | November 20, 2012
...the Japanese bubble that burst in 1990 fostered economic distortions they dubbed 'malinvestments' --- credit-driven investments in real capital that prove loss making when a credit bubble implodes.
'The results of these misconceived investment decisions take a long time to work their way out of the system, while industries that expanded in response to high demand in the bubble are left with excess capacity. The elimination of this excess and the process of adjustment to a new industrial structure to reflect changed demands, which in Japan's case means a greater service orientation to address an ageing population, is invariably painful.
'In effect, low funding costs in Japan have impeded the process that Joseph Schumpeter dubbed creative destruction because 'zombie' companies have been kept afloat at high cost to the competitiveness of others.'
Mr Plender focuses on China as the next economy to be plagued by zombies. In an effort to keep the growth rate high, China is making capital too cheap... and funding too much capacity that is unneeded..
More... (print page link)

chinese-zombie.gif

(Warning: Nasty, noisy, auto-start video at the official webpage)

Also:
China Is Mass Producing "Zombie Companies" And They're Eating Away At The Economy
businessinsider.com | Aug. 21, 2012