Gobi Sands And Deflationary Boom Of Technology

Gobi desert is "not sandy, but is covered with bare rock".

This post is inspired by "The Fly", that is known for "faith in government criminality to lead the way..." The Fly had an interesting posting "GLOBAL GROWTH IS BACK" yesterday, with these fascinating sentences in particular:

Moreover, America is old hat, compared to the cool people from Asia—who have slaves for labor and gamblers for rich folks. Those fuckers will buy so many LCD teevee’s, Corning Incorporated (GLW: 16.17 0.00%) will run out of sand to make the glass that goes into those fuckers.

This brings me back to a research piece by Nomura's analysts on "China's LCD manufacturing policy" last week:

Change in Chinese industrial policy: This uptick in LCD panel plant construction in China has come about as a result of a change in industrial policy. To date, China’s LCD TV industry has consisted of importing panels and carrying out low value-added module processes. China’s current efforts to enter upstream processes by moving into panel manufacturing, which has high technical barriers to entry and carries higher value added, are reminiscent of its previous moves to foster the textiles and machinery industries. In other words, the policy is to start with labor-intensive processes, where China can take advantage of its low labor costs, and then gradually spread to upstream and downstream operations, concentrating industries, including peripheral businesses, in specific geographic areas in a bid not only to improve cost competitiveness but also increase technical competitiveness and garner higher value added. China’s strategic efforts to bolster its LCD industry are triggering demand for plant and equipment, irrespective of LCD panel supply-demand conditions. There had been a sense that the LCD production equipment industry had peaked out following the major capex programs that ran through 2008, but we now see greater scope for growth in demand.

One should think how predictable are "China's strategic efforts ... triggering demand, irrespective of supply-demand conditions"!

There should be no wonder, if cash for clunkers is working in the US, that cash for LCD and wash machine is working in China.

Although economists at Societe Generale sounded a bit disappointed regarding the Chinese domestic consumption in their "Global Economic Outlook" today, writing that "except for automobile, which benefits from support incentives, there is no significant rise in consumption", the retail sales growth is not that bad (click to enlarge, courtesy of Societe Generale)!



Why are there some people who think that China unlikely to lead recovery?

Even worse, Albert Edwards, the top ranked strategist of Societe Generale, wrote yesterday:

An end of the Chinese bubble of belief will have serious consequences for the global financial markets.