Posted on 06/17/2013 6:37:45 PM PDT by TexGrill
In a classic case of procrastination, China has been keeping its massive debt crisis at bay by issuing more debt. However, Fitch’s Charlene Chu, a leading expert on China’s debt, thinks the country’s time is up. ”The credit-driven growth model is clearly falling apart,” said Chu in a recent report. Chu’s argument is that usually “stress starts in the periphery and moves to the core.” Here are five signs that she’s right:
1) Plummeting exports in May
A government crackdown on fake trade invoicing likely caused a sharp drop-off in exports, which rose 1% year-over-year in May, compared with 14.7% in April. (Export traders overstate export orders to take out cheap loans in Hong Kong, funneling those loans into shadow banking investment products, which offer higher returns.) That means export growth (and economic growth overall) has been much less than China’s headline data suggest.
2) The spike in interbank rates continues
Smaller banks are scrambling to get cash. Interbank rates began spiking in early June, when the export invoice crackdown officially began. The immediate cause was the alleged default on mid-tier Everbright Bank’s 6 billion yuan loan from Industrial Bank. The crackdown on invoicing probably worsened the resulting liquidity shortage. The one-week rate has come down only a little from early June.
(Excerpt) Read more at qz.com ...
The real problem with ghost cities and other forms of extravagant government investment is that the economy can not support actually filling up and using those ghost cities and other improvements. The workers simply don’t earn enough money to pay rent, support city government including schools, and live a decent lifestyle. The country is better off if hundreds of millions of people continue to live in rudimentary agricultural districts. Think about it. What if Obama’s stimulus program included building hundreds of thousands of housing units in Detroit and then allowed low income people to move into them. How could that arrangement ever be afforded? China is about to find this out.
If China regulates higher wages to make everything affordable for individuals, manufacturing facilities will move to other less expensive countries and conditions will worsen. If China pursues a higher technology manufacturing policy, then fewer people will have jobs to even dream of living in these new ghost cities. Building these cities was the easy part. Putting them to use in a sustainable way will be the impossible part. Whew!
so does this mean they will call all the US debt that they are carrying???
They build ghost cities because people don’t have anyplace else to place their savings. They have an incredibly high savings rate, due to their one-child policy, also called the “four grandparent policy.” Everybody fears that there will be nobody to care for them in their dotage, including the government. Savings rates are abysmal and nobody trusts the banks. So they put their money in building projects where nobody is going to live in the hopes of keeping something for their old age.
That makes sense. Thanks.
This is the reason China will not attack Taiwan. The U.S. will defend Taiwan and void much of the debt held by China.
Is there any country in the world that isn’t?
However, I believe the real explanation is a ready-made place for elites to move into after cities are destroyed by war.
That also makes sense.
We shouldn’t envy the Chinese.
I've wondered if the cities are for us. Easily converted to prison cities. The world has ~7 billion people and the only group keeping the world from going totally UN communist is 50 million people that vote conservative in US elections. Without us the US would go commie and the UN would be free to force their form of communism on the whole world.
Not saying I believe that, but I have wondered.
You have something there. But the Chinese would rather put us in camps here in the States ....or simply nuke us.
More “China is failing” propaganda to keep us from raising import tariffs and protecting our markets.
What ‘China doubters’ have wrong about its ghost cities: Stephen Roach
Does everyone have the Chinese ‘ghost towns’ story all wrong?
Why Jim Chanos is Wrong About China's "Ghost Cities"
Thank you very much, DannyTN.
According to Keith, the issue of "ghost cities" also has to do with a misunderstanding of the way the Chinese deal with property, as opposed to how it's dealt with in the United States. China takes more of a "use it or lose it" approach, contrasted with a "bank it and wait for demand" approach in the United States.
"The situation with property in China is changing in places, somewhat, but historically there are no property taxes...at least as the West knows them. In China, once you've gained control of a piece of property, developers typically have a finite period of time to begin construction or lose the property. You don't have these situations like in the United States, where a developer can buy a piece of property and sit on it for years, effectively banking it until the demand is there. In China, you have to build, even if it means the buildings lie empty. And when it's time for people to move in, they'll see if the building's held up over time. If it's not, they'll knock it down and, many times, build a new one."
He continued, "The other thing to consider is that historically developers didn't have to pay taxes on empty buildings, so they almost had an incentive to build and leave it unoccupied for lack of a better term. That's a wrinkle that someone who hasn't been to China wouldn't see or understand. This is obviously changing as China begins to implement Western-style taxes."
This isn't government investment - it's private sector investors plonking down cash on spec for condo units.
If the answer is no then that would explain why Obummer and Soros sent their operatives to give advice to Beijing officials to sabotage their economy.
The built the ghost cities as a real estate scam poster. It worked like this
Mr. Chan builds the city and sells it Mr. Ching for a profit who sells it to Mr. Wu for a profit who sells it to Mr. Chui for a profit who sells it to Mr. Cheung for a profit who sells it to Mr. Li for a profit. But what you need to know is that Mr. Chan, Ching, Wu, Chiu, Cheung and Li are all part of a cartel. They sell the property back and forth to each other getting loans to cover the cost by exploiting lose banking laws in China
They then sell property to Mr. Smith from the US/Australia/UK for a profit who then loses money because nobody will buy or rent the buildings since cost is so high.
The problem is it only works once as Mr. Smith tells all his friends how he was cheated. But the Chinese developers thinking that Westerners are all dumb kept building the cities and selling the property to each other only to find Mr Smith, Jones and Anderson said “No thanks” So the Chinese real Estate scam artist simply ran out of suckers
Wow, that’s really interesting. What a scam.
Thanks.
I don’t think we should envy China in any way.
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