I’ve been following the story of China’s shipping bubble only tangentially, but the short version is that China’s biggest shipbuilder is in financial trouble for building too many ships. But don’t worry, Beijing knows just what to do. And if you guessed that Beijing’s solution is “Give them more money to build even more ships,” then you may be be living in the Age of Misallocated Capital.
Zero Hedge has the details:
What may come as news is that in its attempt to prevent the wholesale collapse of yet another sector, the Beijing politburo, which these days has a perfect analogue in the “Monetary Mandarins of the Marriner Eccles building”, is preparing to blow up the latest and greatest Chinese bubble. We are talking about China’s sprawling shipping industry, of course.
Recall that it was a month ago that we present “China’s first Too Big To Fail Lack of Liquidity casualty” – China Rongsheng Heavy Industries Group, which “appealed for government aid last Friday and said it was cutting staff as it was delaying payments to suppliers to deal with tightened cash flows.” It appears that the government took a long hard look at the bailout application, and decided to fold, realizing that should China’s shipping industry fail, the collapsing dominoes would have far-ranging implications, both vertical and horizontal, across the already deteriorating Chinese economy.
“A Crisis Delayed is a Crisis Enworsened” ought to be tattooed on the foreheads of leaders around the world.