China Bails Out World's Largest Maker Of Solar Panels

One has to see the common themes emerged from the postings on China, Japan and Korea.  The similarities are so there.

If history is any guide, central planning ends badly.  Russia is a case in point.  They built a technological base, yet many languish in poverty.

Asian tigers’ innovation model including that of Korea has flaws.  So has their economic model in the first place.  They have steered their economies through innovation and production with mercantilist twist.  The bill is coming due.  This is one of the key points I’m trying to get across on this blog.

Their innovation undertaking is based on mercantilist command economy.  It has been against the market-based system.

Since there has been a multi-decade improvement in infrastructure and living standards and the technological leap, people don’t seem to see the fallacy of its model.  The strengths of this model have masked the reality.

Who has been the ultimate beneficiaries with this model?  Innovation and production capacity building have been the icing on the cake to a large extent.  Due to the model serving their interests well, the global economy booming and the USD's role as global reserve currency, it has sustained.  Now that model is broken.

Again, without a market-based economic system and democracy in place, their rigorous innovation drive can’t serve the benefits of the most people.  Meaningful regulatory reforms and policy changes should follow.

From Zero Hedge:

Chinese local governments are facing the prospect of major unemployment problems should the swathe of solar panel makers, that have been subsidized from birth to now-near-death, continue to suffer from US and European tariffs (as well as simple gross mis-allocation of capital amid massive over-capacity). However, as is the way of the mal-investing world today, no barrier to rational economic theory is too low for government status-quo maintenance as it would appear that local banks have been strong-armed into extending loans to keep them alive. As Reuters reports, debt-laden (NYSE-traded) SunTech Power Holdings  - which is close to removal from the exchange due to its dismal equity price - has just received new 'bailout' loans. First, it was a race to debase. Now, we have the race to bailout the world's most worthless companies (especially in channel-stuffed industries) as the New Normal trade wars continue.

http://www.zerohedge.com/news/2012-09-30/china-bails-out-worlds-largest-maker-solar-panels