China’s Largest Port Builder cuts its IPO Funding Target by 75%, China’s Boom Times Over?

Posted by PITHOCRATES - February 4th, 2012

Week in Review

Could the bloom be off the Chinese economic rose?  Perhaps (see China Communications Construction Cuts IPO Offering by 75% by Reuters posted 1/30/2012 on CNBC).

China Communications Construction, the country’s largest builder of ports, launched its long-delayed Shanghai initial public offering on Tuesday, with the IPO’s fundraising target slashed by 75 percent to as much as 5 billion yuan ($789.76 million)…

China’s stock market [.SSEC  2330.41    17.85  (+0.77%)   ] slumped 22 percent last year under the weight of monetary tightening and global economic uncertainty, forcing many Chinese companies to postpone their listing plans or cut fundraising targets.

China Communications Construction will sell up to 1.6 billion shares in Shanghai, or about 10 percent of its enlarged capital, and will use the proceeds to fund construction projects and equipment purchases, according to its prospectus.

A slumping stock market and global economic uncertainty?  Things that don’t bode well for an economy based on manufacturing for export.  The boom times may be over.  When they cut the funding expectations by 75% for a company that will use those funds for construction projects and equipment purchases tells you one thing.  Investors don’t think there will be much more construction or equipment purchasing in the not so distant future.  And, perhaps, that there is a surplus of capacity in Chinese manufacturing.

The Chinese were pumping so much easy credit into their economy that they got inflation worries.  Which could be the least of their worries.  Their greatest worry is, or should be, an asset bubble.  Their coordinated effort to raise economic activity with their state capitalism built like there was no tomorrow.  And all those ghost cities built without anyone to live in them may come back to haunt them.  Making Japan’s Lost Decade look more like an unpleasant weekend.  For that’s one thing the Japanese didn’t do.  Build cities for people who weren’t there.

Japan’s Lost Decade was a boon for Bill Clinton and the United States.  For it helped to make the Nineties a prosperous time.  Until those irrational expectations spoiled the party.  Those dot-com investors looking for the next Microsoft.  But a Chinese lost decade may not be as beneficial for the U.S.  Without the Chinese to buy the exploding U.S. debt they will have to find other means to fund that debt.  Either with taxes.  Or with a hidden tax.  Inflation.  Either way is sure to tank economic activity in the U.S.   Dragging out this Great Recession into depression-like waters.

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