Skip to comments.Debunking The Chinese 'Soft Economic Landing' Myth: Short The Bubble
Posted on 12/20/2011 2:35:03 AM PST by TigerLikesRooster
Debunking The Chinese 'Soft Economic Landing' Myth: Short The Bubble
December 19, 2011
Chinas growth curve has gone parabolic in recent years. For the last couple of decades, China has typically averaged 10% GDP growth, and it has maintained that growth even as a multi-trillion dollar economy. Of course, 10% growth in an economy already worth trillions is an astounding achievement, but it can also lead to severe economic tribulations, such as soaring housing and food prices. China has incurred both of these troubles. As a growing middle class emerges, demand for beef has far outstripped supply growth, and beef is typically making record highs every month. Additionally, the usage of real estate as collateral for local government loans, amongst other factors, has led to soaring housing prices.
China has a significant housing bubble on its hands. Growth in the real estate sector is important in all modern economies. Construction of homes and commercial office space is a huge driver for demand in the steel, cement, and construction sectors, and is an important part of demand in the commodities market. Construction requires the use of iron (in steel), copper, and fuel. Moreover, local governments depend wholly on rising land and real estate prices, since almost all of their collateral is in their properties. The famously investment driven Chinese also depend heavily on rising home prices to attain better rates of return than are possible in other markets.
(Excerpt) Read more at seekingalpha.com ...
China: A bubble burst would be like a billionaire who stop producing and simply consume his savings
USA: A bubble burst would be a poor person with huge debt with no income and no savings
China will be better off than USA
No it won’t.
China’s heading for major riots and blood shed. Much of China is smoke and mirrors. Central planning never works and it won’t work this time.
And see this:
It was posted here recently.
This is nearly a month old:
there maybe riots and blood shed, but majority will still be better off. Theres more central planning in USA than China
No it wont.
Chinas heading for major riots and blood shed. Much of China is smoke and mirrors. Central planning never works and it wont work this time.
I agree with you. Also I recently read here on FR that there are already a large number of riot type situations in China every year, something over 100K. If the News Media wasn’t just another bureau in the government they would be reporting nothing else.
China is like that billionaire who gamble/misallocate resources constantly, but still have tonnes of savings and income. China can afford to throw money down the drain.
Greece can not
100k? Out of a billionare population is nothing. USA had the occupy wallstreet riot recently
billionare=billion i mean
China is also hugely in debt. They’ve already thrown away huge amounts of money on projects that nobody wants. They cannot afford to blow more - but they will - chasing growth that won’t come from additional debt.
That and China is aging fast.
It’s expected that, over the next 20 years or so, the productive number of citizens will basically halve over that period.
It will be like Japan, but with nowhere near the level of productive capacity or wealth.
There has been a huge population upheaval in China to meet the changes that have occured in the last 15 years, mostly in the shift from farm based to manufacturing based economies. Extremely large populations of educated young people finding little opportunities to work and slave wages of those who do, yet huge wealth all around. The political party was founded by peasant farmers which are not happy with the status quo. Large numbers of uneducated relocated to meet the manufacturing boom. When the economy tanks because of sluggish exports, it will get very ugly domestically.
$3 trillion reserves. How much is their debt? If its not more than $3 trillion, then they’re still ahead
Any economy that shows a vast GDP such as China’s that grows ten percent per year, every year, is doing so with made up numbers.
Rivers and lakes are polluted...short of water
The massive areas of wind generators has caused climate change , particularly decreased rainfall....resulting in low food production.
The only thing they got a lot off is rare earth minerals.
and generations of forced one child families results in la serious lack of women....I guess Barnie Frank will vacation there.
In 2006, it cost $100,000 to buy a decent apartment in Beijing. The average Chinese citizen would have had to save for 32 years based on the average disposable income. Five years later, in 2011, it cost $250,000. Of course, the actual price of housing is irrelevant if incomes are rising as much, if not more than housing prices are growing. Unfortunately for Chinese citizens, income growth came up short, and it now takes more than 57 years of saving to be able to cover the cost of buying said apartment. 57 years of saving is not a normal figure for average citizens in a healthy, economically balanced real estate market. Even the chairman of China Construction Bank, one of Chinas largest banks (and who is heavily dependent on strong real estate growth) said, In some ways, real-estate prices are really crazy.
Housing prices got to this level mainly because the Chinese government wanted its citizens to save, but it has not offered them viable alternatives to the real estate market in which to invest.
As previously mentioned, the stock market has been too volatile for most individual investors, capital markets are considered to be overwhelmingly underdeveloped, and the deposit rates that banks are paying their customers are much too low to provide reasonable rates of return after inflation is factored in. Thus, citizens have had no other practical investment vehicles in which to park their savings.
Here’s the an example of Chinese central planning in action:
If you believe that is real economic activity producing real wealth and will not end a disaster of epic proportions I don’t know what to tell you.