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Debunking The Chinese 'Soft Economic Landing' Myth: Short The Bubble
Seeking Alpha ^ | 12/19/11

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

China’s 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 ...


TOPICS: Business/Economy; Foreign Affairs; News/Current Events
KEYWORDS: bubble; china; crash; realestate

1 posted on 12/20/2011 2:35:09 AM PST by TigerLikesRooster
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To: TigerLikesRooster; PAR35; AndyJackson; Thane_Banquo; nicksaunt; MadLibDisease; happygrl; ...

P!


2 posted on 12/20/2011 2:35:37 AM PST by TigerLikesRooster (The way to crush the bourgeois is to grind them between the millstones of taxation and inflation)
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To: TigerLikesRooster

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


3 posted on 12/20/2011 2:56:30 AM PST by 4rcane
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To: 4rcane

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.


4 posted on 12/20/2011 3:02:02 AM PST by DB
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To: 4rcane

And see this:

http://www.athensnews.gr/portal/12/51658

It was posted here recently.


5 posted on 12/20/2011 3:03:14 AM PST by DB
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To: 4rcane

This is nearly a month old:

http://www.forbes.com/sites/gordonchang/2011/11/27/can-china-rescue-its-economy/


6 posted on 12/20/2011 3:07:14 AM PST by DB
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To: DB

there maybe riots and blood shed, but majority will still be better off. Theres more central planning in USA than China


7 posted on 12/20/2011 3:07:26 AM PST by 4rcane
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To: DB

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.


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.


8 posted on 12/20/2011 3:09:14 AM PST by The Working Man (The mantra for BO's reign...."No Child Left a Dime")
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To: DB

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


9 posted on 12/20/2011 3:13:40 AM PST by 4rcane
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To: The Working Man

100k? Out of a billionare population is nothing. USA had the occupy wallstreet riot recently


10 posted on 12/20/2011 3:15:03 AM PST by 4rcane
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To: 4rcane

billionare=billion i mean


11 posted on 12/20/2011 3:15:38 AM PST by 4rcane
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To: 4rcane

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.


12 posted on 12/20/2011 3:19:56 AM PST by DB
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To: DB

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.


13 posted on 12/20/2011 3:23:44 AM PST by Jonty30 (What Islam and secularism have in common is that they are both death cults.)
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To: Jonty30
I will be much worse...

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.

14 posted on 12/20/2011 3:44:52 AM PST by fuente
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To: DB

$3 trillion reserves. How much is their debt? If its not more than $3 trillion, then they’re still ahead


15 posted on 12/20/2011 4:04:07 AM PST by 4rcane
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To: TigerLikesRooster

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.


16 posted on 12/20/2011 4:07:05 AM PST by stevem
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To: Jonty30
You can't forget pollution as a factor either, toxins in the environment will start to shave years off people's lives in the workforce and add to rising medical costs. I know a family that was exposed heavily to dioxins in this country and all but one died well before retirement of assorted cancers. The Chinese government does have the ability to control social situations somewhat by being able to lie freely about conditions but that is like covering a wound with a dirty bandage and letting the infection rage. In any case the one child policy will destroy them it has gone on way past the time that it would of created any benefit and has become a stumbling block to future growth. I am of the opinion that the suffering and collapse of China will be greater then that in the West but then China has a long history of suffering, it is an old familiar dance for China.
17 posted on 12/20/2011 4:07:27 AM PST by dog breath
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To: DB
It's already happening:

http://www.telegraph.co.uk/news/worldnews/asia/china/8967692/Wukan-protests-across-South-China-as-riot-police-take-on-demonstrators-in-Haimen.html

18 posted on 12/20/2011 4:22:12 AM PST by Former Proud Canadian (Obamanomics-We don't need your stinking tar sands oil, or the jobs that go with it.)
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To: dog breath
Yeah...they cut down all the forests so have to import chopsticks from Oregon....short of wood.

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.

19 posted on 12/20/2011 4:57:56 AM PST by spokeshave
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To: spokeshave

and generations of forced one child families results in la serious lack of women....I guess Barnie Frank will vacation there.


20 posted on 12/20/2011 4:59:58 AM PST by spokeshave
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To: TigerLikesRooster; ding_dong_daddy_from_dumas; stephenjohnbanker; DoughtyOne; calcowgirl; ...
Does this sound familiar??

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 China’s 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.

Full article:
Debunking The Chinese 'Soft Economic Landing' Myth: Short The Bubble

21 posted on 12/20/2011 5:32:40 AM PST by sickoflibs (You MUST support the lesser of two RINOs or we all die!)
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To: 4rcane

Here’s the an example of Chinese central planning in action:

http://www.youtube.com/watch?v=rPILhiTJv7E

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.


22 posted on 12/20/2011 1:38:59 PM PST by DB
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To: AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; ColdOne; Convert from ECUSA; ...

Thanks sickoflibs.


23 posted on 12/20/2011 2:48:03 PM PST by SunkenCiv (Merry Christmas, Happy New Year! May 2013 be even Happier!)
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To: 4rcane
" China will be better off than USA "

Forget about Europe buying China's products.
Without the USA consumers China's economy would be nothing.
China can't depend on domestic consumption because they have a small amount of people in China compared to the rest of their population to buy things.
Without the USA consumer, China is in trouble.
China can't leverage their foreign reserves because that would cause their currency to go up in value.
Also, China has to much debt loaned out.
They have a over compacity problem they are dealing with, and over investment by the government of projects of the sort of the bridge to nowhere.
The type of investments they made did not produce any kind of real a economy, in other words, crap investments, money wasted.
24 posted on 12/20/2011 10:27:12 PM PST by American Constitutionalist (The fool has said in his heart, " there is no GOD " ..)
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To: 4rcane
" $3 trillion reserves. How much is their debt? If its not more than $3 trillion, then they’re still ahead "

It depends on what kind of reserves they are talking about.
There was a report here on FR that if they try to leverage their foreign reserves it would cause their currency to go up in value, that is not what they would want to happen.
If their currency goes up in value, it would make their exports more costly.
That is the one thing that the USA has been trying for years is for China to de peg their currency from our dollar.
What is China going to do with the debt we owe them ? call it in ? if we ain't got it, to bad, what are they going to do ? dump our debt ? yeah, go ahead, your biggest trading partner, or are they going to go to war over it ?
Looks like China is stuck between a rock and a hard place.
25 posted on 12/20/2011 10:35:41 PM PST by American Constitutionalist (The fool has said in his heart, " there is no GOD " ..)
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To: stevem
" 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."

It's called, the House of Cards, or the house that is built on sinking sand.


26 posted on 12/20/2011 10:37:11 PM PST by American Constitutionalist (The fool has said in his heart, " there is no GOD " ..)
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To: 4rcane
Money is already pouring out of China at a fast rate.
Even some government officials are stealing money from the Chinese government and moving elsewhere.
There was a report here on FR a few days ago that says that " HOT MONEY " is flowing out of China.
I guess we can call it the canary in the mine... some see the crap getting ready to hit the fan in China.
There are companies that set up business and production in China 10 years ago moving out of China and moving back to the USA.
It's not going to be pretty in China soon.
A unstable China and North Korea is not good news on top of the bad news in the middle east.
Notice gasoline prices have gone down ? that's because of the global demand for fuel has gone down and China is a major part of that.
Noticed in the last 25-20-10 years the MSM has made a big hoopla over how China was so great ?
Now notice how silent they are about the problems China is facing ? the MSM does not want to lose face because of the faith they put in commie China, and it makes their philosophical belief in China all a big lie.

Hey MSM ?? China's system sucks, and the MSM sucks.... it was all a big LIE !!
27 posted on 12/20/2011 10:48:25 PM PST by American Constitutionalist (The fool has said in his heart, " there is no GOD " ..)
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