China's Economy: Apocalypse Soon? - NYTimes.com HONG KONG - Talk of an economic slowdown in China has become so loud and persistent that it now has its own slang: ghost cities, ghost fleets, rocket eggs, naked officials. The downturn has even led to the invention of a new financial algorithm, something called the China Stress Index - and the index remains high. Some of the stresses were mentioned over the weekend by Prime Minister Wen Jiabao as he spoke of "huge downward pressure" on the world's No. 2 economy, due principally, he averred, to slackening consumer demand in Europe and real estate speculation at home. As my colleague Keith Bradsher reports, housing construction has nearly stopped. Work sites that had recently been going round the clock seven days a week are now down to one shift - and just on weekdays. Analysts and government planners are now resigned to the fact that the growth rate in 2012 will slip under the once-magic (and numerologically auspicious) figure of 8 percent. Instead, keeping growth above 7 percent has become the immediate task at hand, especially with the important 18th Party Congress coming this autumn. Nomura, the Japanese financial services firm, has launched the China Stress Index, and the Nomura analyst Rob Subbaraman affirmed Monday that the company sees "a one-in-three probability" that China will experience "a hard economic landing commencing before the end of 2014." Foreign Policy magazine has a new overview of the economy called "Five Signs of the Chinese Economic Apocalypse." Business Insider sees that bet, and triples it, with a story headlined "Fifteen Reasons Why Everyone Is Suddenly Freaking Out About China." In making its case for apocalypse now, or soon, the Foreign Policy piece says, "Businesses are taking fewer loans. Manufacturing output has tanked. Interest rates have unexpectedly been cut. Imports are flat. GDP growth projections are down, with some arguing that China might already be in recession. Government figures released Monday showed that consumer prices dropped 0.6 percent in June compared with May, raising the concern of deflation, as Keith reports. Meanwhile, though, some food prices have risen so sharply (and food contamination scares have been so profound) that people are increasingly growing their own vegetables and more folks are keeping pigs. Mainland chickens are now laying "rocket eggs," a reference to their price trajectory. Local governments, after years of massive and prideful investments, are now seeing loans coming due. How many of these loans are already underperforming is a matter of some debate among economists and analysts. The central government in Beijing is even insisting on some austerity now, from sell-offs of the fleets of luxury cars assigned to local bosses to cutbacks on high-end liquor and nosh at official banquets. Some of the (few) more bullish analysts speak admiringly of the robustness of the state banking system and Beijing's ability to manipulate the levers of its highly controlled economy. But when they start listing areas of deep concern, they can barely come up for air. Sales of luxury goods in China, for example, are slowing. Wealthy mainlanders, including government and party officials, are feverishly offshoring their cash by buying properties abroad, from Hong Kong and Macau to Australia, Europe and the United States. Hedging against possible political or economic upheavals, they are keeping so few (seizable) assets in China that they're being called luo guan - "naked officials." Coal, iron ore and copper also are piling up in China, which has led Chinese shippers, once happy to ply the coastal routes, to head for blue water in search of new business. In a new blog post - "Is China Running Out of Steam?" - Evan Osnos of The New Yorker called this "the freight equivalent of deer wandering out of the woods in search of food. Because it materialized out of the shadows, shipping people have it named the 'ghost' fleet. There are plenty of China experts in the gloom camp, and some in the doom camp. In a recent Barron's piece called "Falling Star," Jonathan Laing took the temperature of Jim Chanos, "the most outspoken Sino-Skeptic" on Wall Street. Never one to mince words, Chanos contends that China is headed for a hard landing of epic proportions because of its shaky financial system and an imminent collapse in its property market, which undergirds the entire economy. "I'm being conservative when I say that the coming bust in China's real-estate market will be a thousand times that of Dubai," he told Barron's. After a recent trip to China, Rosemary Righter wrote in The Times Literary Supplement of "tens of millions of houses and apartments as well as Ozymandian public buildings and factory estates - and what hits the eye is how much of it all stands empty. Across the country, uninhabited concrete blocks scab the land, not only in the megacities of the eastern seaboard but also in the sleepier southwest; from filthy mining towns in Henan, all the way to entire ghost towns in Inner Mongolia. Mr. Laing also got a diagnosis from Edward Chancellor, a global strategist for GMO, the investment management firm based in Boston. "I can't tell you precisely when the downturn will hit," he says. No one can. All I know is that China has all the earmarks of a classic mania that will end badly - a compelling growth story that seduces investors into ill-starred speculation, blind faith in the competence of Chinese authorities to manage through any cycle, and over-investment in fixed assets with inadequate returns facilitated by an explosion in credit. Calling China a "Field of Dreams" economy --- if we build it, they will come --- he mentioned "a highway system with sparse traffic, local airports running at half-capacity and the rapidly expanding national high-speed railroad system, a technical marvel that can't charge ticket prices sufficient to pay for itself."