Chinese economy headed for a major collapse

Three people were trampled to death in a Chinese supermarket recently.
They were part of a crowd jostling to buy cooking oil that was on sale. Cooking oil and a lot of other basic foodstuff are at a premium in China.
This crowd and the tragic deaths are a symbol of a financial ailment in booming Chinese society.
For the first time in 20 years of growing incomes and a thriving economy, Chinese workers are finding that their money no longer goes as far as it used to.
Prices are rising faster than wages, according to a BBC news story.
The price of staple foods has jumped dramatically this year. Cooking oil prices are up 100 per cent. Pork, the main meat in this populous country, is up 70 per cent in price.
Pork and poultry pricers are responding to disease outbreaks that wiped out much of the supply.
People are finding it hard to live let alone buy all the extra stuff they want. Demand for "stuff" will fall, leading to unemployment in the Chinese industrial sector.
China can't afford that kind of scenario. The government needs continued fast growth to provide jobs for the masses of rural folks moving to the cities every year.
Falling standards of living and reductions in job growth will lead to resumption of food riots in rural areas. Food riots have occurred in the past. Or, worse yet, something like the Tiannemen Square riots could happen.
With the Olympics coming in 2008, China doesn't want that sort of embarrassment.
Many experts on China believe the Chinese government will try to end the food inflation with price controls on staple foods and products.
Price controls, as Canada learned in the Trudeau era, are a band-aid solution when surgery is needed. Canadian price controls were unable to avoid the inflation-killing recession of the 1980s when home mortgage interest rates hit 18 per cent.
There is no reason to believe China's experience will be any different.
Another ailment in China, similar to a flu, will come from reduced exports as an American recession kicks in.
Short-term measures may postpone a Chinese recession, with the post-Olympics period most likely for the economy to slow.
Investors should watch the Chinese scenario closely.
Stocks in companies whose growth or fortunes depend on Chinese consumers - Wal-Mart, McDonald's to name a few - will lag.
A Chinese recession may offer investors a chance to buy into the over-priced Chinese market at a more reasonable level.
Bizword columns do not solicit buying or trading of securities. Investors need to do their own homework or consult advisers.

Ron Walter can be reached at 691-1264.