We will take a look at Schiff from two perspectives shortly. First let's note the massive influx of workers into Chinese cities is now in reverse as Chinese job losses prompt exodus.



Tens of thousands of migrant workers are leaving the southern Chinese city of Guangzhou after losing their jobs, railway officials say. The increase to 130,000 passengers leaving the city's main station daily is being blamed on the credit crunch.



Guangzhou is one of China's largest manufacturing hubs, but many companies who export products have collapsed. Chinese officials are worried that a sudden increase in unemployment could lead to social unrest.



The most badly hit export companies are toy, shoe, and furniture manufacturers. There are already reports of demonstrations and social unrest in the provinces of Zhejiang and Guangdong.

Toy Manufacturing Collapses

A total of 3,631 toy exporters or 52.7 percent of the industry's businesses shut down in 2008. They were mainly small-sized toy producers with an export value of less than $100,000.

Workers at a toy factory in Guangdong have become the latest victims of the worldwide financial tsunami.



More than 6,000 employees lost their jobs when Smart Union, a major toy manufacturer in Dongguan, closed earlier this week. "The main reason for the closure is we are too dependent on the US market, which has become sluggish," said Xu Xiaofang, a Smart Union human resource worker.



After losing money for the first half of the year, its cash flow finally dried up.

Machinery normally busy churning out toys for major US toy brands Mattel and Disney now sits idle.

Speaking in an interview with Guangzhou Daily, Wang Zhiguang, vice-chairman of the Dongguan Toy Industry Association, said: "Of the 3,800-odd toy firms in Dongguan, no more than 2,000 are likely to survive the next couple of years."



Xiao Yong, the owner of a Dongguan firm that sells Christmas trees and gifts, is equally worried about what the coming winter might have in store.



"One of the main problems is that many toymakers in Dongguan rely too much on orders from the US and Europe. The financial crises there have led directly to a reduction in orders," he said. The number of orders his firm has received for this Christmas is about half what it reported last year, he said.

Two sub-contract manufacturing factories under one global toy maker in South China's Guangdong Province have collapsed, in the first bankruptcy case for the substantial economy in China, according to today's National Business Daily.



The two factories, located in Zhangmutou Town of Dongguan City, were toymakers for Smart Union Group (Holding) Ltd, one of the world's largest manufacturing and trading companies in toys and recreational products on an original equipment manufacturer basis. All the products were being sold to the United States.

Home Prices Collapse In China

The speedy rise — and speedier fall — of River Dragon is a depressingly familiar story in China these days. Thousands of Chinese factories have shuttered in the past year, done in by:



•An export-killing global slowdown that began with the collapse of the U.S. housing market and the ensuing financial crisis.



•Rising materials costs that have squeezed profit margins.



•A deliberate Chinese government campaign to regulate sweatshop factories out of business.



The Chinese economy is absorbing another blow beyond crumbling exports: collapsing home prices. Nicholas Lardy, senior fellow at the Peterson Institute for International Economics in Washington, D.C., reckons a slowdown in construction could shave another 1 to 2 percentage points off China's economic growth.



"The property bubble is already starting to burst," says Yan Yu, a business management scholar at Peking University, researching the export center of Dongguan in southern Guangdong province. "House prices here in Dongguan have fallen by up to 50% this year," leaving many homeowners owing more on their mortgages than their homes are worth.



"People have worked all their lives and believed the hype and bought overvalued properties, then saw their savings vanish," says independent economist Andy Xie in Shanghai. "That carries more political risk" than rising joblessness.

China Announces Major Stimulus Plan

China announced a stimulus program that could exceed half a trillion dollars, its biggest move yet to rebuild rapidly weakening confidence and unleash domestic demand to counter the prospect of global economic recession.



The package of infrastructure investment and other stimulus measures is to be spread over the next two years and appears to include some measures that were already announced. Still, the huge scale of the planned response -- potentially 4 trillion yuan ($586 billion) -- underscores how rapidly the outlook for China's once-booming economy has worsened and how the country remains comparatively well-placed to deal with such a slowdown.



Other governments around the world are also considering fiscal stimulus plans to boost their economies, something the International Monetary Fund has encouraged. U.S. lawmakers, during their lame-duck session next week, are expected to consider a stimulus package focused on aid to local governments and extended unemployment benefits.



U.S. House Speaker Nancy Pelosi is pushing for a two-step plan with as much as $100 billion this month followed by a companion measure early next year that would include a tax cut. Outside economists are urging Democratic congressional leaders to move a much larger package -- as much as $300 billion, or 2% of U.S. economic output -- as the U.S. economy faces one of its worst recessions since the 1930s.



China's plan appears to be comparable in size. In a statement announcing the plan, China's State Council said it would deliver 120 billion yuan ($18 billion) of new spending in the last quarter of this year alone. The State Council -- effectively China's cabinet -- estimated that would drive an additional increase of 400 billion yuan in local and private-sector investment throughout the economy.



China's government is also making plans for new spending in areas such as low-cost housing, road and rail infrastructure, agricultural subsidies, health care and social welfare over the next two years.

Peter Schiff - Hugely Right, Enormously Wrong

Summit Of Winners

Decoupling Missed

Too Anti-Dollar Focused

Escalating Inflationary Pressures

Tuesday, July 1st, 2008

By Peter D. Schiff



Last week the U.S. Federal Reserve moved one step closer to acknowledging reality.



Unfortunately, it didn’t let that admission move it from a policy course firmly guided by fantasy - meaning the central bank opted to stand pat on interest rates, despite the clear escalation of inflationary pressures. ...

should

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