Free Republic

Why China Is The Mother Of All Grey Swans

Never short a country with $2 trillion in reserves? February 2nd, 2010 by Michael Pettis /snip Ok, we can argue about these things, and we can agree to disagree, but where he completely blew it was, I suspect, on the one topic are where he was absolutely certain he could not be wrong. Too bad, because he was. Friedman proposed, yet again, a common misconception over the meaning of China’s huge accumulation of foreign reserves. He argued that thanks in part to the size of the reserves it would be impossible to make money by shorting China. “First,” he warned,...

Chinese Quest for Shortcut to Greatness Submitted by Vitaliy Katsenelson on 01/28/2010 13:22 -0500 The Chinese economy must be getting out of control, because the Chinese government is doing the unthinkable: It is desperately trying to put the brakes on the economy. When you pump a stimulus package that represents 14% of GDP through a fire hose into an economy, which was already on shaky bubble foundation, in a very short time you’ll have some serious unintended consequences -- you’ll get super bubbles. /snip This symbiotic match made in heaven between China and the US consumer worked great as long...

November 29, 2009 ECONOMIC VIEW Dangers of an Overheated China By TYLER COWEN PRESIDENT OBAMA’S recent trip to China reflects a symbiotic relationship at the heart of the global economy: China uses American spending power to enlarge its private sector, while America uses Chinese lending power to expand its public sector. Yet this arrangement may unravel in a dangerous way, and if it does, the most likely culprit will be Chinese economic overcapacity. Several hundred million Chinese peasants have moved from the countryside to the cities over the last 30 years, in one of the largest, most rapid migrations in...

China’s September data suggest that the long-term overcapacity problem is only intensifying /snip Industrial policies create overcapacity I agree with the last paragraph, but otherwise I am pretty skeptical about the fight against overcapacity. According to my model of China’s overcapacity problem, the source of the imbalance is a set of industrial policies that systematically shift income from households to producers, and as long as these policies continue there is little chance of resolving the problem of excess production. I have a longish piece coming out next month as a Carnegie Brief on the Carnegie Endowment website, in which I...

Beijing's Olympic building boom becomes a bust Many buildings in the city's impressive skyline are empty. By Barbara Demick February 22, 2009 Reporting from Beijing — "Empty," says Jack Rodman, an expert in distressed real estate, as he points from the window of his 40th-floor office toward a silver-skinned prism rising out of the Beijing skyline. "Beautiful building, but not a single tenant. "Completely empty. "Empty." /snip Beijing went through a building boom before the 2008 Summer Olympics that filled a staid communist capital with angular architectural feats that grace the covers of glossy design magazines. /snip By Rodman's calculations,...

How will China deal with the US adjustment? January 9, 2009 by FT By Michael Pettis The post-1997 global balance is breaking down, and the world is lurching drunkenly to find a stable new balance. Until now, Chinese overproduction has balanced US overconsumption, leading to China’s massive trade surplus and capital account deficit. Inevitably, however, a reduction in US overconsumption, a necessary consequence of the financial crisis, must force a corresponding reduction in overproduction elsewhere, and China, like it or not, will have to bear the brunt of the adjustment. The US and Europe must design their fiscal and monetary...

Commentary: China flirts with deflation as economy cools By William Pesek Jr. Bloomberg News WEDNESDAY, NOVEMBER 30, 2005 Anyone notice how quickly "overheating" has been dropped from investors' China lexicon? In the annals of word-disappearance cases, it merits a mention. "Not long ago, overheating was all anyone could talk about," said John Chan, managing consultant at Shanghai-based China Streetsmart. "Now, fears of China getting too hot rarely come up." Give credit where it's due: Chinese officials seem to be pulling off an orderly deflating of their nation's economic bubble. Along with this year's deftly handled 2.1 percent revaluation of the...

/begin my translationChinese Economy Slowing Down (Hong Kong, Yonhap News) correspondent Kwon Young-suk -- Due to contracting investment, Chinese economy is slowing down, according to the analysis of Morgan Stanley on July 12. Andy Xie, a Morgan Stanley's analyst, said in his report that Chinese corporate profit and real estate price has changed their trend and now on their way down, while corporate investment is decreasing. He emphasized, "In particular, the austerity measures introduced in August 2003, had been loosened since last October, which allowed overcapacity of Chinese economy to persist." Report also notes that China's demand deposit has skyrocketed from 4.4 trillion yuan($531.6 billion) in 2001 to current level of 7.5...

Gentlemen, kill your engines By Jamil Anderlini SHANGHAI - Two weeks ago, in a beautiful display of dry banker's understatement, Morgan Stanley lowered its rating on China's automobile industry to "cautious" from "in-line". But "cautious" doesn't quite tally with the actions of the world's biggest auto manufacturers over the last year and certainly fails to capture the current mood that must pervade the Shanghai boardrooms of General Motors, Volkswagen and all the other car companies that have been pouring spectacular sums into the Chinese car market. "Blind panic" might be a more apt description. Sitting in their corporate boxes at...

<p>DETROIT -- Not since the 1920s have American consumers had so many choices when shopping for a new car or truck.</p> <p>Twenty-one American, British, German, Swedish, Japanese and now South Korean automobile companies offer 41 brands comprised of more than 1,000 car and truck models in total.</p>

CINCINNATI — Much of the public outcry over America's failure to generate jobs has focused lately on a surge in the outsourcing of work to China and India. But another dynamic closer to home is weighing on job creation — the slow process of working through a glut of boom-era investment that continues to litter the economy with underused factories. Procter & Gamble, for example, has been dumping its weakest brands and the plants that produce them. At its Ivorydale industrial complex here, in Procter's hometown, the company has sold factories that make Crisco shortening, Olean fat substitute and Ivory...

Like hundreds of other CFOs in Asia, Oh Se Kang has spent a good part of this year assessing the merits of a new investment in China. In particular, he's looked at whether or not to build a US$300 million paper mill in Hebei province, 280km southwest of Beijing, to feed the local market with newsprint. Oh's analysis was exhaustive but, in the end, positive. On September 10, his firm, Singapore-based Pan Asia Paper, decided to go ahead. When the plant opens in late 2005, it will make the company the biggest producer of newsprint in China. The business case...