China's Vice Premier Sees "Chronic Global Recession"; Why this Astonishing Admission?

It's not often we hear candid talk from global leaders about the economic realities that lay ahead. This is one of those rare times.

Please consider China vice premier sees chronic global recession

A long-term global recession is certain to happen and China must focus on domestic problems, Chinese Vice Premier Wang Qishan has said.

"The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic," Wang was quoted by the official Xinhua news agency as saying at the weekend.

Wang's comments were the most bearish forecast ever by a top Chinese decision-maker about the world economy, and Beijing's worry about a worsening global environment could translate into an impetus for pro-growth policies at home.

Why this Astonishing Admission?

Regular Mish readers will not find that forecast surprising in the least. What is surprising is the high-ranking official who makes that forecast.

In a world of global economic denial about the Euro, about deficits in the US, about housing bubbles in Australia, China, and Canada, and in general denial about every economic woe the world faces, one might ask "why this astonishing admission?"

I have a 3-part answer

1. As China shifts from an untenable infrastructure model to a consumption model, as Europe faces a Eurozone breakup and harsh recession, as the US faces a deficit crisis (albeit halfheartedly at best), much global pain is in order.
 
2. By framing the problem as a global problem, the vice-premier gets to blame the world economy for the internal strife in China.
 
3. This is an indication that China is falling apart right here, right now, much faster than the Western world believes.

The admission by the vice-premier simply reflects the demise of China's export model in the face of a rapidly slowing global economy accompanied by a regime change in China that will be forced to shift its internal priorities.

These thoughts echo comments I have made previously in ...

• Europe Undeniably in Recession; Germany Manufacturing PMI Contracts for First Time in Two Years, New Orders Collapse
 
• Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied)
 
• Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited
 
• History Suggests Greece Will Freeze Bank Deposits, Exit Euro by Christmas; Spain and Portugal to Follow Next Year; What's the Rational Thing to Do?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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