Normally, when quoting from newspaper articles, I try — not always successfully — to limit myself to the first four paragraphs. Donald Douglas, on the other hand, frequently quotes more, and considering that the original source is The New York Times, which limits non-subscribers to ten free article views a month, I think that I’ll refer you to Professor Douglas’ article, where you can read more without going over your NYT limit:
Beijing heavily controls the value of the yuan (when it appreciates against the dollar, Chinese goods become more expensive, potentially hurting the country’s export-led economy). But what fascinated me about this piece was the effects on global traders from the default of a major bond investor to the tune of $163 million:
Over the years, China’s investors and trade partners have come to rely on what amounts to a “Beijing put,” an option that provides assurance that a minimum level of growth will be attained. When the country looked set to fall short, the government would intervene to prime the pumps — freeing up credit, introducing subsidies and otherwise ensuring that China avoided any real economic pain and remained on track as the world’s fastest-growing major economy.
Yet in the face of apparently slowing growth, this implicit guarantee is showing signs of fraying. Markets around the world are growing worried, from Australian iron ore miners to the luxury fashion houses of Europe to American scrap exporters.
Take copper, where global prices have fallen sharply in recent weeks. This is partly the result of concerns that growth is slowing in China, which accounts for more than 40 percent of global consumption of the metal. But the falling prices represent another, bigger fear — one that focuses on the role copper plays in China’s huge shadow finance sector and the realization that Beijing will not always be there with a bailout.
Further down in the article, if you choose to read it — and you should — you’ll notice that the problem was caused by a default on ¥1 billion ($163 million) of bond interest payments due by Shanghai Chaori Solar Energy Science and Technology Company.
Dr Douglas’ article, as well as the Times original — and there is more there, if you want to read it — goes more deeply into the financial situation, and I’m happy to let them address that part of the issue. What intrigued me was that the default was by a small producer of solar panels. The Chinese aren’t concerned or controlled by our House of Representatives and the evil Republicans who dominate it; how is it that everyone in the world other than we wicked American conservatives are so concerned about global warming, and doing something about it, yet the manufacturers of solar panels are having such problems?1
Somehow, no matter how much good, noble, well-intended people like former Vice President and Nobel Laureate Al Gore tell us that we have to worry about climate change, no matter how much august statesmen like Secretary of State John F Kerry tell us that climate change is as big a global threat as terrorism, poverty and weapons of mass destruction, in the actual real economy, it seems as though the favored businesses to provide alternative, renewable energy sources just aren’t doing very well. It’s almost as though it isn’t just radical right-wing global warming deniers who don’t take the Chicken Littles of climate change very seriously.