The data raise fresh doubts about the strength of global trade and whetherthe world can rely on China's growth miracle to power recovery.
Separately, the Baltic Dry Index – measuringfreight rates for bulk goods – has tipped over, dropping 25pc since late July.The shipping figures buttress reports that China has stopped building up stocksof metals and other commodities after a spate of frantic buying over the earlysummer.
Beijing is walking a tightrope by trying to offset the collapse in exports –almost 40pc of GDP – with an investment blitz in roads, railways, and industrythrough state-owned companies.
The real economy cannot absorb the money, so it isleaking into asset speculation. The central bank estimates that 20pc of freshcredit has ended up in equity markets. The Shanghai index is up 80pc thisyear, though profits have fallen by almost a third. The pattern echoes the finalphase of Japan's Nikkei bubble in 1989.
"China is a big fat tail risk for world markets," said Hans Redeker, currencychief at BNP Paribas. "Shanghai equities have reached the same extreme as inlate 2007. The country will have to cut credit growth, and when this happens,Shanghai equities and commodities will suffer. That is what could bring thisglobal rally to a halt."
China Construction Bank, the number two lender, is cutting loans by 70pc overthe second half of the year. "We noticed that some loans didn't go into the realeconomy. Housing prices are rising too fast," said the bank's president, ZhangJianguo.
Andy Xie, a leading consultant, said China's boom was a "giant Ponzi scheme"that was likely to "bring very bad consequences" for the country.
"The stock market is in a final frenzy again. The most ignorant retailinvestors are being sucked in by rising momentum," he said. Equities areovervalued by 50pc to 100pc.
Mr Xie, who wrote his doctoral thesis on Japan's bubble in the 1980s, saidChina's ratio of property prices to incomes is seven times higher than in theUS. It costs three months' salary per square meter of space – arguably thehighest in the world – though tower blocks are sitting empty. Prices are beingpropped up by state enterprises, abetted by local Communist bosses.
Mr Xie said Chinese booms and busts follow a political rythmn. There is adeeply-rooted belief that the authorities can keep the game going – the "Pandaput", China's answer to the "Greenspan Put" – and that the Communist Party willnot let the rally fizzle before the 60th anniversary of the revolution onOctober 1. This belief is self-fulfilling, for a while.
Mr Xie expects China's rally to falter around October, followed by freshshots of liquidity before the economy falls into a deeper slump by 2012."Property prices could drop like Japan's in the last two decades, which woulddestroy the banking system," he said.
Mr Xie said China's asset boom is the flip-side of the weak US dollar. USmonetary stimulus is in effect leaking across the Pacific. Bust will follow whenthe dollar rallies, draining liquidity again. If the Fed tightens abruptly as itdid under Paul Volcker in the early 1980s, the denouement could be painful forChina.
Beijing deserves praise for trying to switch reliance from exports towardsthe domestic economy. It has had some success. Retail sales have risen 15pc overthe last year. But Professor Michael Pettis from Beijing University said it isproving very hard to induce the Chinese to alter their spending habits. Thecultural barriers will take years to overcome.
Instead, the stimulus is feeding more industrialinvestment, leading to more excess capacity worldwide. While Chinese GDP continues to grow near8pc, this is based on output. In the West, GDP growth is based on spending.These two definitions are chalk and cheese.
The underlying story has not changed. The East-West imbalances that laybehind the Great Recession of 2008-2009 are getting worse, not better.