The China bubble

[Mikemanvick]

I've always been interested by the amazing growth of the Chinese market. It has always seemed to unreal in the amount growth they sustain. Well this article points out some issues.


http://finance.yahoo.com/retirement/...etire-planning

[Heinz Guderian]

i dunno man , China is pretty badass

[Giuliano Taverna]

If it does collapse, so will the current regime.

[bushbush]

ppl have been saying of a COMING crash for 20 years. I know people are pissed themselves that their economies went bust, but let's not wish harms on others.

[Space Wolves]

ppl have been saying of a COMING crash for 20 years. I know people are pissed themselves that their economies went bust, but let's not wish harms on others.

Win

[Mr. Scott]

ppl have been saying of a COMING crash for 20 years. I know people are pissed themselves that their economies went bust, but let's not wish harms on others.

Well, it pretty much means that china is overdue for one. The hints of it were shown in this recession in which the first quarter of last year china hit around 1 % grwoth. They told everyone they had a healthy growth of 8% but the Chinese government measures growth differently then the other major economic powers. In a sense its cheating on their growth. They give innaccurate measurements of growth...

[bushbush]

Well, it pretty much means that china is overdue for one. The hints of it were shown in this recession in which the first quarter of last year china hit around 1 % grwoth. They told everyone they had a healthy growth of 8% but the Chinese government measures growth differently then the other major economic powers. In a sense its cheating on their growth. They give innaccurate measurements of growth...

that's just load of BS.

http://www.nytimes.com/2009/04/16/bu...al/16yuan.html

the growth rate in first quarter was 6.1% higher than previous first quarter. But the stimulus package kicked in the latter quarters and 8% will probably be surpassed anyways.

and the growth rate is measured the same way in GDP as other countries. Do you have any source on the so called "differences"?

even IMF projects China to grow at 8.5%. OMG IMF is cheating like China too?

http://www.imf.org/external/pubs/ft/...9/02/index.htm

Projected % Change 2009 Real GDP 8.5 Consumer Prices -0.1

[Chukada1]

that's just load of BS.

http://www.nytimes.com/2009/04/16/bu...al/16yuan.html

the growth rate in first quarter was 6.1% higher than previous first quarter. But the stimulus package kicked in the latter quarters and 8% will probably be surpassed anyways.

and the growth rate is measured the same way in GDP as other countries. Do you have any source on the so called "differences"?

Phew, good to know. Thanks bushbush.

[BNS]

that's just load of BS.

http://www.nytimes.com/2009/04/16/bu...al/16yuan.html

the growth rate in first quarter was 6.1% higher than previous first quarter. But the stimulus package kicked in the latter quarters and 8% will probably be surpassed anyways.

and the growth rate is measured the same way in GDP as other countries. Do you have any source on the so called "differences"?

Surfing through your source look what I just found.

Contrarian Investor Predicts Crash in China


James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true. Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.
As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict, David Barboza of The New York Times reports from Shanghai.
China’s surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” Mr. Chanos frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.
“Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.” He is planning a speech this month at the University of Oxford to drive home his point.
As America’s pre-eminent short-seller — he bets big money that companies’ strategies will fail — Mr. Chanos’s narrative runs counter to the prevailing wisdom on China. Most economists and governments expect Chinese growth momentum to continue this year, buoyed by what remains of a $586 billion government stimulus program that began last year, meant to lift exports and consumption among Chinese consumers.

http://dealbook.blogs.nytimes.com/20...a/#more-162795

[Farnan]

China is industrializing. Every industrializing nation faces the same or nearly the same rate of growth. The US + West Europe had it in the late 19th Century and Japan in the mid-late 20th Century. Eventually it will hit the optimal level and then begin to slow down and plateau like every other nation has.

[Exarch]

ppl here seem to assume that a bubble bursting will automatically mean China's out for the count-that it's the end of the China story; i see this as wishful thinking after all, it's like thinking the USA after the 1929 wall street crash, was going to go the and never going to come back.
commodities investor, jim rogers put it perfectly:


finally, in my opinion, a bubble bursting can be a good thing because it enhances efficiency and means resources can be diverted to more effective and efficient industries, ie it enhances competitiveness

[JP226]

Well... I can see both sides of the issue. Typically you do have countries that have little to nothing growing at high rates but:



The housing bubble didn't look too different. I do think the chinese economy is getting too hot. Take an 8% GDP growth rate, that means an economy is growing by one third every year. What's to sustain it? Or what is sustaining it? Traditional answers are growth in machinery, labor and technology based on demand but does china actually have that demand? The international market is crap right now, espeically it's big buddy the US, and the local economy doesn't have that kind of demand or cash. It's entirely reasonable to assume that credit is creating artifical demand thus stimulating chinese production.

We could honestly be in a serious world of hurt in the foreseable future. Right now the US economy is only breathing because government lending has taken upwards of 75% of the credit market. All the private banks are sitting on cash. If the long term treasuries go too high and the US can't afford to lend out money, consumption drops here. Consumption drops in China. That could trigger a chinese melt down and make what we just went through look like child's play.

[bushbush]

The housing bubble didn't look too different. I do think the chinese economy is getting too hot. Take an 8% GDP growth rate, that means an economy is growing by one third every year. What's to sustain it? Or what is sustaining it? Traditional answers are growth in machinery, labor and technology based on demand but does china actually have that demand? The international market is crap right now, espeically it's big buddy the US, and the local economy doesn't have that kind of demand or cash. It's entirely reasonable to assume that credit is creating artifical demand thus stimulating chinese production.

this year's stimulus by PRC is used in a way that's even worse than the one in the US; it's being dumped into the real estate market and speculation in large extent. The Chinese are taking note of that though, at official level they are warning this and already there are crackdowns to speculative practices. China might do another stimulus next year (i think the only large country with money to do that again is China) and hopefully they lend their money more to the private sector instead of letting the government officials dumping the money to their favorite construction companies and play with the housing market.

We could honestly be in a serious world of hurt in the foreseable future. Right now the US economy is only breathing because government lending has taken upwards of 75% of the credit market. All the private banks are sitting on cash. If the long term treasuries go too high and the US can't afford to lend out money, consumption drops here. Consumption drops in China. That could trigger a chinese melt down and make what we just went through look like child's play.

US better recovers fast. Or China better finds ways to stimulate its domestic demand. That's the only two ways China can sustain its growth once stimulus runs out.

[BNS]

The question is how much of the growth is artificial. Don't let those Keynesian models fool you.

Ah the wonders of state stimulus projects. Watch and laugh... or cry:


Housing bubble you say? Try city bubble.

[JP226]

China might do another stimulus next year (i think the only large country with money to do that again is China) and hopefully they lend their money more to the private sector instead of letting the government officials dumping the money to their favorite construction companies and play with the housing market.

The US will probably do one too I'd imagine. Unfortunately there is nothing stimulative about the stimulus in either country. Ours was nothing more than a way to get spending passed that normally wouldn't have gotten through and a few taxcuts and accounting changes. If they were smart it would have gone solely to infrastructure and the military plus a series of tax adjustments. Even then, there is only so much you can do especially in today's fast pace world.

US better recovers fast. Or China better finds ways to stimulate its domestic demand. That's the only two ways China can sustain its growth once stimulus runs out.

There is nothing we're seeing on an actual economic turn around til at earliest the end of this year. Then it's going to be slow. And at best unemployment could be around 7% nation wide come 2012. It's going to be a very slow and stagnant recovery. I think based on that alone, China is in alot of problems.

[bushbush]

There is nothing we're seeing on an actual economic turn around til at earliest the end of this year. Then it's going to be slow. And at best unemployment could be around 7% nation wide come 2012. It's going to be a very slow and stagnant recovery. I think based on that alone, China is in alot of problems.

the PRC has enough money to do the stimulus one more year til world economy gradually recovers. But China has to get its domestic demand up eventually, export market's potential is increasingly limited.

Surfing through your source look what I just found.


http://dealbook.blogs.nytimes.com/20...a/#more-162795

same article as OP, which i dont think you ve read...

[Farnan]

Maybe some trouble may be good for China. A shock to the system. Right now they've been able to ignore internal matters because their economy has been so good, but a shock can force them to deal with those issues now before it becomes unfixable.

[JP226]

Maybe some trouble may be good for China. A shock to the system. Right now they've been able to ignore internal matters because their economy has been so good, but a shock can force them to deal with those issues now before it becomes unfixable.

That's the problem with these overnight wonders or instant gratification economies is that they grow to such an extent on a weak foundation, when they come tumbling down, they rock the world. As it was pointed out earlier "the US was fine afte the great dperession, why won't china be?" Well, the US, I guess thanks to the Brits, had very strong legal, governmental and econmic institutions. Same wiuth Western Europe, institutions that were centuries in the making. I'm a big fan of institutional economics that if you have a strong foundation, get the hell out of the way everything will be fine. SUch isn't the case with china and if they hit the ceiling and come tumbling down what's going to happen? Wars are created over things like this, although I doubt that would happen, I could see a giant vegetable.

[bushbush]

SUch isn't the case with china and if they hit the ceiling and come tumbling down what's going to happen? Wars are created over things like this, although I doubt that would happen, I could see a giant vegetable.

a strong possibility if the CCP doesn't speed up its political reforms and improve rule of law any time soon.

[Farnan]

And thats why I'm saying a shock to the system can be good. Not a collapse but a period of reduced growth and maybe a small recession. Enough that the government has to do something about the issues.