Is the Chinese Economy Sputtering for the Same Reasons as the American Economy?

It was tempting to believe that China was different.

With its command and control economy with some of the trappings of free market capitalism, trillions in reserves, and abundant natural resources, many thought that China would "decouple" from the Western world's problems and sail into a prosperous future.

However, despite its long history, exotic names and seemingly strong position, China cannot avoid the rules of economics which have applied to all countries throughout history.

Corruption and Phony Bookkeeping

Corruption and the failure to follow the rule of law is one of the main factors which has dragged down the American economy.

The fact that - according to the Chinese central bank - Chinese officials stole $120 billion and fled the country does not auger well for China.

Scandals among various Chinese companies are not helping, either.

And then there are the made up statistics. As Warren Hatch of Catalpa Capital Advisors notes:

As Li Keqiang, the vice premier and heir-apparent to Wen Jiabao, laconically remarked to the US ambassador a few years ago, most of the statistics in China are “for reference only.” 

And Charles Hugh Smith argues:

Despite their many differences, the economies of China and the U.S. share a number of key traits: both are corrupt, rigged, crony-Capitalist, rely on phony statistics and propaganda and operate with two sets of rules: one for the Elites, and another for the masses.
Despite their many differences, the economies of China and the U.S. share a number of key traits: both are corrupt, rigged, crony-Capitalist, rely on phony statistics and propaganda and operate with two sets of rules: one for the Elites, and another for the masses.

Can We Trust You?

The credit crisis hit in 2008 largely because American banks lost trust in one another. Specifically, top economists say that each bank had so much bad debt on its books (in the form of mortgage backed securities and derivatives which worth the paper they were written on) which made them essentially insolvent that they assumed that all of the other banks must be in a similar situation ... so they stopped lending to each other.

This drove the price which banks charged each other for loans (libor) skyrocket, and the whole credit market froze up.

The same thing is now happening in China. As ZeroHedge reports, Chinese interbank lending is freezing up and "shibor" - the prize which Chinese banks charge each other for loans - is skyrocketing.
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More on this subject:
http://www.washingtonsblog.com/2011/06/is-chinese-economy-sputtering-for-same.html