223,000 Houses Flattened

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223,000 houses flattened

Investors may want to weather-proof
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3 Feb 08 - China’s recent weather has flattened 223,000 houses and left 100 million people across China shivering. It's also sent a deep chill through mainland-related equities by dramatically exposing the frailties of China's quasi-market economy.

But with more freezing weather forecast, the question remains how bad will it get? Prime Minister Wen Jiabao has been doing his utmost to ensure this La Nina season does not become his own equivalent of George W. Bush's Hurricane Katrina.

 

For 800,000 of the migrant workers marooned at Guangzhou's central train station this past week, many of whom were attempting holiday travel, it gives an uncomfortable pause for thought about life in China's miracle economy. The government was perhaps fortunate crowds have so far been too cold and too hungry for riots to break out.

A bad situation quickly escalated due to power shortages that can be traced back to the central government's recent ad hoc tightening measures and imposition of price controls in its efforts to rein in inflation.

When the power producers are prevented from passing on soaring raw material costs, profit-seeking behavior is to stop producing, especially when transport costs are also rocketing. Instead, coal mines will direct supplies to smelters or export markets that can afford higher prices.

Last reports said 18 million hectares of arable land has been damaged by the freeze so casualties amongst agricultural producers and some of the favored agricultural stocks look likely. Reports say pigs are fast dropping dead in the cold snap. Food importers look like a better bet for now, especially those with big stockpiles of staples such as wheat and rice.

See all of this commentary by Craig Stephen
(on www.marketwatch.com)
Thanks to Paul Korth for this link



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