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

Seeking Alpha ^ | 12/19/11

[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.

[TigerLikesRooster]

P!

[4rcane]

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

[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.

[DB]

And see this:

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

It was posted here recently.

[DB]

This is nearly a month old:

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

[4rcane]

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

[The Working Man]

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.

[4rcane]

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

[4rcane]

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

[4rcane]

billionare=billion i mean

[DB]

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.

[Jonty30]

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.

[fuente]

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.

[4rcane]

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

[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.

[dog breath]

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.

[Former Proud Canadian]

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

[spokeshave]

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.

[spokeshave]

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