China's Growing Gluts - Rana Foroohar

Most people assume China emerged triumphant from the financial crisis: it's still growing 8 percent a year, is flush with cash, and didn't even feel the credit crunch, thanks to a trillion dollars in new bank lending in 2009. But the easy money has led to overconfidence, producing major industrial surpluses; China is making much more than it needs. A recent EU Chamber of Commerce in China report found that aluminium factories are operating at just 67 percent of capacity, and steel at 72 percent--yet Beijing is ramping up production. The same goes for green technology; the country uses only 70 percent of its available wind power, yet more turbines are on the way. All this could result in a destabilizing bout of global deflation as the glut of cheap Chinese goods drives down prices. Combined with another banking crisis--some experts expect 30 percent of new loans to go bad next year--the result could be both a slowdown in China and a global trade war.

For the complete report: China's Growing Gluts - Wealth of Nations Blog - Newsweek.com