I was intrigued by this article on Reuters, reporting that Chinese farmers have planted too many citrus trees. As a result, fruit prices have plummeted and farmers are having trouble finding markets for their citrus at all. That alone is rough on fruit farmers, but the market glitch should work itself out in a couple of years as farmers find new ways to sell and use their fruit. In the meantime, rural China may find itself better nourished on cheap fruit.
However, the larger Chinese economy may face the same issues on a macro scale. The Chinese government’s focus on economic growth as it shifted to capitalism had a bias toward overcapacity; private investors flooded whole sectors with money to gain competitive advantage as fast as possible. Now the government is worried about over capacity in the steel, cement, flat glass, chemically processed coal, polysilicon and wind turbine sectors. The kind of investment needed for that kind of production is also the kind of investment that leads to bankruptcies if demand is flat. And a wave of bankruptcies would be extremely rough on the Chinese economy.