China's Hard Landing

Townhall.com ^ | March 18, 2012 | Mike Shedlock

[Kaslin]

Morgan analyst Adrian Mowat says Chinese Economy Already in 'Hard Landing'

“If you look at the Chinese data, you should stop debating about a hard landing,” Mowat, who is based in Hong Kong, said at a conference in Singapore yesterday. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.” His team was a runner-up for best Asian equity strategists in a 2011 Institutional Investor magazine poll.

Mowat said in May the risk of a hard landing was building in China as fixed-asset investment in real estate had increased even as property demand remained weak. That meant residential inventories will increase and lead to a contraction in construction activity, he said in a May 17 interview.

Gary Shilling, president of A. Gary Shilling & Co., a Springfield, New Jersey-based consultancy firm, said on Feb. 2 that China’s economy is headed for a “hard landing” this year as weaker demand overseas chokes off exports. Shilling, who correctly forecast the U.S. recession that began in December 2007, defines a hard landing as a growth rate below 6 percent.

Shilling and Mowat’s views are in contrast with Yale University Professor Stephen Roach, a former non-executive chairman for Morgan Stanley in Asia, who said on March 8 that concerns China will enter a hard landing are “vastly overblown.”

“I don’t think the banking system will collapse and the property bubble will burst,” Roach said at a conference in Shanghai. “These are all exaggerations.” Roach's Misses the Boat 

Bubbles always burst. Moreover, it should be plain to see

1. China has a huge property bubble
2. China's banking sector is unsound
3. China's state-owned-enterprises (SOEs)  are in horrible shape
4. China's over-reliance on investments with no genuine economic feasibility guarantee China's current boom is not sustainable.

"Hard Landing" Depends on the Definition

Shilling says growth under 6% is a hard landing. Michael Pettis at China Financial Markets makes a strong case for Only 3% Growth for Decade

I think Pettis' growth target is correct, but I am not sure he calls that result "a hard landing". I do, and it will shock a lot of people when it happens.

Jim Chanos is not one of those who will be surprised. He is betting on growth as low as 0% as noted in China's Growth Won't Last; Chanos on Chinese Property Bubble and Growth.

"Curbs Needed to Avoid China Property Chaos"  

Even Chinese Premier Wen Jiabao knows China has a property bubble, one that has already popped but has much further yet to fall.

Bloomberg reports

[Kaslin]

Rest of the article in the link

[The Working Man]

All I want to add is this: Historically when a “Bubble” bursts it never ever regains its historic high. Which in turns means that any funds invested in that “bubble” will never ever be fully recovered after the burst, only if the funds were among the first to get “out”.

[Aglooka]

But how is this possible? Our leaders and media keep telling us that china is a paradise and that we must be just like china. /sarc

[Chode]

with all the GHOST cities they built, i think the word bubble is the grossest understatement i've ever heard...

[rawcatslyentist]

Must’ve ran out of room. Or they don’t expect that many to survive.

[Chode]

ya never know

[Riodacat]

Shilling says growth under 6% is a hard landing.

Sure - that sounds pretty rough.
Meanwhile, back at the ranch, we're batting a buck-fifty.