Chinese Economic Collapse Is Inevitable It S Impossible to Meet Future Energy Demand

___**Steel DA – Aff

UQ – China Econ 2ac

Chinese economic collapse is inevitable – it’s impossible to meet future energy demand

Heinberg, 10 – fellow at the Post Carbon Institute, fellow at the Committee on International Trade and advisor to the European Parliament, National Petroleum Council, and the U.S. Secretary of Energy, (Richard, “China's Coal Bubble...and how it will deflate U.S. efforts to develop "clean coal”, Post Carbon Institute, May 4, 2010, http://www.postcarbon.org/article/96251-china-s-coal-bubble-and-how-it-will)//JK

China: Leading the Global Economy…Into the Ditch Some commentators are concerned about China's economy for reasons that have nothing to do with coal. The prime example: it would appear that Beijing has a problem with over-reliance on property development as an engine of domestic economic growth. One of those sounding the alarm on this score is hedge fund manager James Chanos, founder of Kynikos Associates Ltd.; he says China is "on a treadmill to hell," and that the nation is "Dubai times a thousand." He has also been quoted as saying, "They can't afford to get off this heroin of property development. It is the only thing keeping the economic . . . numbers growing." A bursting of China's property bubble could collapse the nation's economy quickly and soon. But it is essentially a problem of money, and money is a creation of the human mind. Currencies can be reformed; banking systems can be reorganized. Such things are painful and take time, but they are certainly possible—and historic examples are numerous. Energy is different. Without energy, nothing happens. Transport systems stall; building construction and manufacturing cease. The lights go out. You can't make energy out of nothing and you can't call it into existence with computer keystrokes, as bankers can do with money. Generating electrical power requires physical resources, infrastructure, and labor. And so there are natural limits to how much energy we can summon for our human purposes at any given time. China has become a great manufacturing powerhouse largely because it was able to grow its energy supply quickly and cheaply. And so China's contribution to the world economy is to this extent a function of China's contribution to world energy. One significant gauge of this link is the fact that Chinese coal production represents more than double the amount of energy contributed to the world economy as compared to Saudi Arabia's oil production (1,100 million tons of oil equivalent vs. 540 Mtoe.) If China faces hard energy limits, that means its economy is living on borrowed time. That also means the world as a whole confronts energy and economic constraints that are harsher, and closer, than we are being told.

UQ – China Econ 1ar

Chinese collapse inevitable in 2012—economic unsustainability and social discontent.

Chang 11 “The Coming Collapse of China: 2012 Edition” BY GORDON G. CHANG (graduate of Cornell University Law Degree| DECEMBER 29, 2011 http://www.foreignpolicy.com/articles/2011/12/29/the_coming_collapse_of_china_2012_edition

In the middle of 2001, I predicted in my book, The Coming Collapse of China, that the Communist Party would fall from power in a decade, in large measure because of the changes that accession to the World Trade Organization (WTO) would cause. A decade has passed; the Communist Party is still in power. But don't think I'm taking my prediction back. Why has China as we know it survived? First and foremost, the Chinese central government has managed to avoid adhering to many of its obligations made when it joined the WTO in 2001 to open its economy and play by the rules, and the international community maintained a generally tolerant attitude toward this noncompliant behavior. As a result, Beijing has been able to protect much of its home market from foreign competitors while ramping up exports. By any measure, China has been phenomenally successful in developing its economy after WTO accession -- returning to the almost double-digit growth it had enjoyed before the near-recession suffered at the end of the 1990s. Many analysts assume this growth streak can continue indefinitely. For instance, Justin Yifu Lin, the World Bank's chief economist, believes the country can grow for at least two more decades at 8 percent, and the International Monetary Fund predicts China's economy will surpass America's in size by 2016. Don't believe any of this. China outperformed other countries because it was in a three-decade upward supercycle, principally for three reasons. First, there were Deng Xiaoping's transformational "reform and opening up" policies, first implemented in the late 1970s. Second, Deng's era of change coincided with the end of the Cold War, which brought about the elimination of political barriers to international commerce. Third, all of this took place while China was benefiting from its "demographic dividend," an extraordinary bulge in the workforce. Yet China's "sweet spot" is over because, in recent years, the conditions that created it either disappeared or will soon. First, the Communist Party has turned its back on Deng's progressive policies. Hu Jintao, the current leader, is presiding over an era marked by, on balance, the reversal of reform. There has been, especially since 2008, a partial renationalization of the economy and a marked narrowing of opportunities for foreign business. For example, Beijing blocked acquisitions by foreigners, erected new barriers like the "indigenous innovation" rules, and harassed market-leading companies like Google. Strengthening "national champion" state enterprises at the expense of others, Hu has abandoned the economic paradigm that made his country successful. Second, the global boom of the last two decades ended in 2008 when markets around the world crashed. The tumultuous events of that year brought to a close an unusually benign period during which countries attempted to integrate China into the international system and therefore tolerated its mercantilist policies. Now, however, every nation wants to export more and, in an era of protectionism or of managed trade, China will not be able to export its way to prosperity like it did during the Asian financial crisis in the late 1990s. China is more dependent on international commerce than almost any other nation, so trade friction -- or even declining global demand -- will hurt it more than others. The country, for instance, could be the biggest victim of the eurozone crisis. Third, China, which during its reform era had one of the best demographic profiles of any nation, will soon have one of the worst. The Chinese workforce will level off in about 2013, perhaps 2014, according to both Chinese and foreign demographers, but the effect is already being felt as wages rise, a trend that will eventually make the country's factories uncompetitive. China, strangely enough, is running out of people to move to cities, work in factories, and power its economy. Demography may not be destiny, but it will now create high barriers for growth. At the same time that China's economy no longer benefits from these three favorable conditions, it must recover from the dislocations -- asset bubbles and inflation -- caused by Beijing's excessive pump priming in 2008 and 2009, the biggest economic stimulus program in world history (including $1 trillion-plus in 2009 alone). Since late September, economic indicators -- electricity consumption, industrial orders, export growth, car sales, property prices, you name it -- are pointing toward either a flat lining or contracting economy. Money started to leave the country in October, and Beijing's foreign reserves have been shrinking since September. As a result, we will witness either a crash or, more probably, a Japanese-style multi-decade decline. Either way, economic troubles are occurring just as Chinese society is becoming extremely restless. It is not only that protests have spiked upwards -- there were 280,000 "mass incidents" last year according to one count -- but that they are also increasingly violent as the recent wave of uprisings, insurrections, rampages and bombings suggest. The Communist Party, unable to mediate social discontent, has chosen to step-up repression to levels not seen in two decades. The authorities have, for instance, blanketed the country's cities and villages with police and armed troops and stepped up monitoring of virtually all forms of communication and the media. It's no wonder that, in online surveys, "control" and "restrict" were voted the country's most popular words for 2011. That tough approach has kept the regime secure up to now, but the stability it creates can only be short-term in China's increasingly modernized society, where most people appear to believe a one-party state is no longer appropriate. The regime has clearly lost the battle of ideas. Today, social change in China is accelerating. The problem for the country's ruling party is that, although Chinese people generally do not have revolutionary intentions, their acts of social disruption can have revolutionary implications because they are occurring at an extraordinarily sensitive time. In short, China is much too dynamic and volatile for the Communist Party's leaders to hang on. In some location next year, whether a small village or great city, an incident will get out of control and spread fast. Because people across the country share the same thoughts, we should not be surprised they will act in the same way. We have already seen the Chinese people act in unison: In June 1989, well before the advent of social media, there were protests in roughly 370 cities across China, without national ringleaders. This phenomenon, which has swept North Africa and the Middle East this year, tells us that the nature of political change around the world is itself changing, destabilizing even the most secure-looking authoritarian governments. China is by no means immune to this wave of popular uprising, as Beijing's overreaction to the so-called "Jasmine" protests this spring indicates. The Communist Party, once the beneficiary of global trends, is now the victim of them. So will China collapse? Weak governments can remain in place a long time. Political scientists, who like to bring order to the inexplicable, say that a host of factors are required for regime collapse and that China is missing the two most important of them: a divided government and a strong opposition. At a time when crucial challenges mount, the Communist Party is beginning a multi-year political transition and therefore ill-prepared for the problems it faces. There are already visible splits among Party elites, and the leadership's sluggish response in recent months -- in marked contrast to its lightning-fast reaction in 2008 to economic troubles abroad -- indicates that the decision-making process in Beijing is deteriorating. So check the box on divided government. And as for the existence of an opposition, the Soviet Union fell without much of one. In our substantially more volatile age, the Chinese government could dissolve like the autocracies in Tunisia and Egypt. As evident in this month's "open revolt" in the village of Wukan in Guangdong province, people can organize themselves quickly -- as they have so many times since the end of the 1980s. In any event, a well-oiled machine is no longer needed to bring down a regime in this age of leaderless revolution. Not long ago, everything was going well for the mandarins in Beijing. Now, nothing is. So, yes, my prediction was wrong. Instead of 2011, the mighty Communist Party of China will fall in 2012. Bet on it.

UQ – China Steel

China Steel weak now- slowed growth, profit decline, and export slump prove

China Daily 6-23 [China Daily, 6-23-12, “China crude steel sector grows slower”,

http://www.chinadaily.com.cn/business/2012-06/23/content_15519267.htm, accessed 6/24]

BEIJING - Growth of China's crude steel output slowed in the first five months, as demand dropped amid a cooling domestic economy, according to data from the country's top economic planner. Crude steel output increased by 2.2 percent year-on-year to 296.26 million tons during the January-May period, down from 8.5-percent growth recorded during the same period last year, data with the National Development and Research Commission showed. In May, crude steel output rose 2.5 percent from a year earlier, 5.3 percentage points lower than last year. Aside from output, the sector's profits also slipped sharply. Steel producers saw profits down 49.5 percent from a year earlier to 39.5 billion yuan ($6.27 billion) in the first four months. In breakdown, profits of ferrous metals mining and dressing companies dropped 7.9 percent, while steel smelting and processing companies saw profits down 68.8 percent. Steel price also fell in May, as the country's average steel composite price index retreated 17.28 points from last year to 118.76. The figure was also 2.76 points lower than the previous month. China's manufacturing sector has been hard hit, after the country introduced measures to cool its property market, a major steel user, and exports slumped amid a lingering eurozone crisis.

Chinese steel economy failing now—demand and prices plummeting.

Chovanec 1/16/2012“How China Could Easily Have A Hard Landing With Any Slowdown In Construction Growth” Patrick Chovanec (Associate Professor of Practice at Tsinghua University’s School of Economics and Management in Beijing, China.) January 16, 2012 http://articles.businessinsider.com/2012-01-16/markets/30631008_1_real-estate-hard-landing-gdp/3

There are two ways that the drop in the property market translates into slower economic growth: direct and indirect. The direct impact is fairly obvious: to the extent that China’s real estate developers are overextended, and preoccupied with selling off their existing inventory in order to stave off bankruptcy, they won’t be commissioning any new projects — maybe not for quite a while. That means no work for construction companies, which in turn won’t be buying any new construction equipment. It also means less demand for steel (construction reportedly accounts for 40% of China’s steel demand), cement, glass, copper pipes and wiring, etc. It also means less furniture and fewer appliances to fill those new homes (although, as we know, many Chinese investors already leave the units they buy empty anyway). The estimates I’ve seen say these sectors dependent on property construction account for between 20% and 25% of China’s total GDP. Frankly, you don’t need a real estate collapse in order to trigger a serious slowdown in these sectors. All you need is a pause in the hitherto frantic pace of construction. Let’s assume the bull argument that, due to urbanization and rising incomes, speculators are right: all the units they’re snapping up today, and holding as investments, will ultimately be filled with end users. That still assumes a catch-up period. If real estate investment, which according to monthly official figures has (even into November) been growing at >30% year-on-year, keeps outpacing urbanization and rising incomes, the gap will never close. At some point, the pace of construction has to moderate to give all that anticipated end user demand a chance to materialize, and start filling all those vacancies. If demand isn’t what speculators imagine it to be, at today’s sky-high prices, the adjustment — and resulting slowdown — will be even more severe. So what evidence do we have that a construction slowdown may be occurring? Official data on housing starts does exist, but it’s not a reliable metric. Developers stand to lose their land back to the government if they don’t do anything with it after a few years. They are also under considerable pressure to show progress on “social housing” mandates that may be a condition of obtaining land. For both reasons, developers will often dig a hole in the ground and call it a “start,” even if they intend to delay further work indefinitely. Last month, China’s Ministry of Housing and Urban-Rural Development (MOHURD) estimated that as much as 1/3 of reported social housing starts were just “digging a hole” rather than actually building apartments. A better approach is to look at the market for construction inputs. The clearest picture we have is for steel. According to a friend of mine who is an analyst in the steel and commodities sector, and recently completed a countrywide tour of talking to producers, sentiment in China’s steel industry is as gloomy as he has ever seen it. n November, Chinese steel output was down -8.8% month-on-month, down for the sixth month in row. More importantly, it was down -0.6% year-on-year, indicating this was more than just a seasonal or partial fall-off from the all-time highs it hit in the first half of 2011, which were driven in large part by demand for cheap rebar for construction. Apparently, the demand that drove that boom has almost entirely disappeared. Interestingly, according to one report by Shanghai Security News, steelmakers say that actual sales in 2011 failed to match official “social housing” construction data. Figures released by the China Iron and Steel Association last week indicate that steel output continued falling in December, by 3.87% month-on-month. Not surprisingly, two things have happened. First, domestic iron ore prices have plummeted as unused stockpiles have accumulated. The China Iron and Steel Association recently announced that its iron ore price index has fallen 22% in the past four months, since the beginning of September, while iron ore inventories at Chinese ports rose to 96.8 million tons by the end of 2011, up 32% from the year before (Chinese iron ore imports were still up 10% y-on-y in December, but analysts expect buying to slow in coming months, due to flagging demand). Second, Chinese steelmakers are suffering. According to Caijing, more than 1/3 of them experienced losses in October and November, and the industry as a whole saw a net loss of RMB 920 million (US$ 146 million) excluding investment gains.