China's Tough Times Ahead

Long before the economic crisis began, I've been talking about the difficulties that China will face in the 4th quarter of this year and the first few quarters of next year, but I feel like I'm always "crying wolf" in an environment that just doesn't want to hear it. The Olympics were incredibly costly, as talked about yesterday, the final price tag might have been in the neighborhood of US$40 billion and the pay off in return is sure to have fallen far short of what the government expected. There were definitely plans for how to deal with the costs of the Olympics, but even with the best plans 1. the losses were greater than expected, and 2. at some point they have to actually pay.

Beyond the Olympics, there was the unexpected consequences of the Sichuan earthquake and the huge bill that comes from that as schools, homes, and businesses need to be rebuilt from scratch in many cases. Even in the best circumstances, things were going to be hard, but when the global economy suddenly went down hill, its' going to be harder than ever on China, and especially those in earthquake damaged areas. This point was brought home excellently in a post on All Roads Lead to China.

Chongqing is far more tempting than Chengdu for most companies, especially as Bo Xilai works his magic there, but for companies looking to help (and get some good PR along the way), Chengdu should be seriously considered if they are looking to get away from the east coast.

Also, while on All Roads, I came across this scary post about fake Corona beer and some interesting comments. Having consumed more than my fair share of alcohol, its a sobering thought (sorry for the pun) and having been involved in some deals involving high end maotai, when you find out how little they actually produce each year and how much is actually out there, its pretty obvious that a large amount of the maotai for sale isn't kosher.