Weakness in China's Economy

Not all economic news coming out of China is good news. China’s biggest problem is their lacks of energy, in particular oil, too fuel its economy. In a report by China Southern Airlines Co., which is the largest carrier in China by fleet size, the airline suffered a 314.2 million yuan ($38 million) net loss in the second half. While at the same time in the previous year it had recorded a 873.3 million yuan gain. The loss has been attributed to the rising oil price. Southern Airlines had to increase fuel expenditure by 66 percent. However, the airline is expected to be able to regain profitability due to the ever increasing travel demands of the Chinese citizens. In addition, China Southern Airlines plans to enact cost cutting measures to reduce the loss in the short run.

This should bring a very important point to everyone’s attention. As I have posted earlier this is probably the year that we hit the world peak in oil production. Hitting the peak will cause the prices to jump even more and costs to rise, also this will cause an ever more heated competition between the United States and China for every last drop of oil that is left. Already, the PRC is starting to catch up to the US on securing oil contracts, and it is only a matter of time before this race will take a more serious turn of direct confrontation over oil interests.