Is China crashing?

[NeverSure]

With the world's second largest economy, but still only about 1/2 that of the US, China has personal and government debt of about 23 trillion dollars. It has a shadow banking system (lenders that aren't banks or regulated like banks) carrying about 1/2 of its loans.

There are rumors that it is defaulting on some debt. Its stock market is down over the past year.

Its GDP is (according to China) growing, but if the ghost city construction and stimulus construction was removed from that, it would be a big negative. Manufacturing has slowed greatly, especially the larger more profitable items.

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[morrobay]

According to an article in the Inter Hearld Tribune last Wednesday . The shadow banking system does include lending by real banks, state banks. But the loans are not regulated the same as normal loans and are made for higher % to less qualified borrowers and land speculators

Edited July 5, 2013 by morrobay

[Gomyway]

To answer your question - not less or more then America. The only advantage of China is that they have more Gold.

[CobraSnakeNecktie]

To answer your question - not less or more then America. The only advantage of China is that they have more Gold.

In some parallel universe maybe but in this one China has a small fraction of the US Gold reserves.

http://en.wikipedia.org/wiki/Gold_reserve

About the article

There are certainly some signs that China growth story might not continue. The media of course tries to paint the most dramatic picture to get attention.

If they wrote an article that China might fall into slower growth or even stagnation then it's not going to get much play.

[craigt3365]

China still seems to be doing OK. Not fantastic growth, but still very decent. They've done a pretty good job with avoiding any sort of hard landing. But time will tell. Lots of issues there and if China sneezes, the whole world will catch a cold.

[Gomyway]

In some parallel universe maybe but in this one China has a small fraction of the US Gold reserves.

http://en.wikipedia.org/wiki/Gold_reserve

LOL - Do you really believe in this numbers? If so, please tell me who can prove them.

Maybe until now you didn't read this http://www.bloomberg.com/news/2013-07-02/yuan-offshore-trade-race-picks-up-with-frankfurt-bid-currencies.html

[craigt3365]

In some parallel universe maybe but in this one China has a small fraction of the US Gold reserves.

http://en.wikipedia.org/wiki/Gold_reserve

LOL - Do you really believe in this numbers? If so, please tell me who can prove them.

Maybe until now you didn't read this http://www.bloomberg.com/news/2013-07-02/yuan-offshore-trade-race-picks-up-with-frankfurt-bid-currencies.html

Where is gold mentioned in that article?

[churchill]

China still seems to be doing OK. Not fantastic growth, but still very decent. They've done a pretty good job with avoiding any sort of hard landing. But time will tell. Lots of issues there and if China sneezes, the whole world will catch a cold.

Isn''t China tightening now what many said the US should have done years ago....

short term pain long term gain ...

Edited July 5, 2013 by churchill

[CobraSnakeNecktie]

In some parallel universe maybe but in this one China has a small fraction of the US Gold reserves.

http://en.wikipedia.org/wiki/Gold_reserve

LOL - Do you really believe in this numbers? If so, please tell me who can prove them.

Maybe until now you didn't read this http://www.bloomberg.com/news/2013-07-02/yuan-offshore-trade-race-picks-up-with-frankfurt-bid-currencies.html

I think the world gold council is fairly well respected. I would have offered their statistics directly for download but it requires a login.. Free to register.

http://www.gold.org/

Please offer any evidence you have but.....

That article did not contain the word "gold" even once.

[Naam]

I think the world gold council is fairly well respected.

[CobraSnakeNecktie]

I think the world gold council is fairly well respected.

Can offer a more credible source than the WGC ?

[Morakot]

I think the world gold council is fairly well respected.

Can offer a more credible source than the WGC ?

Easy, try the: Naamonian Institute of Financial and Economic Research (NIFER)

[rucus7]

Part of China's problem could be the quality of their goods. Or lack thereof. I have spoken with people from various countries that will no longer buy Chinese products. simply because of the poor quality. This is not built in obsolescence. There is no pride or quality in their work , which comes as no surprise considering the working conditions and inferior materials. All China has is a cheap labour force. With no real technology of their own.

[Gomyway]

Sorry, the article from Bloomberg I'd copy was not about Gold but to show you that China is going it's way to get the Yuan as the world reserve currency slowly but step by step.

And about the Gold another word: Who do think sold all the Gold for beating the price down? And who do you think bought it?

Why does it take America seven years to send this requested small amount of Gold back to his owner Germany, when they sell so many just only for beating the price down? The price they could beat with paper.

All given numbers base on reports from the FED or Treasury only and that should make you thinking about.

[craigt3365]

Sorry, the article from Bloomberg I'd copy was not about Gold but to show you that China is going it's way to get the Yuan as the world reserve currency slowly but step by step. And about the Gold another word: Who do think sold all the Gold for beating the price down? And who do you think bought it? Why does it take America seven years to send this requested small amount of Gold back to his owner Germany, when they sell so many just only for beating the price down? The price they could beat with paper. All given numbers base on reports from the FED or Treasury only and that should make you thinking about.

The Yuan won't be the world's reserve currency in either of our lifetimes.

As to the previous post, I avoid any products from China that I can. I've had too many issues with them. Yes, they are cheap. But they are just that.

[CobraSnakeNecktie]

Sorry, the article from Bloomberg I'd copy was not about Gold but to show you that China is going it's way to get the Yuan as the world reserve currency slowly but step by step. And about the Gold another word: Who do think sold all the Gold for beating the price down? And who do you think bought it? Why does it take America seven years to send this requested small amount of Gold back to his owner Germany, when they sell so many just only for beating the price down? The price they could beat with paper. All given numbers base on reports from the FED or Treasury only and that should make you thinking about.

Still waiting for some source that China has any more than about 1/8th of the Gold reserves of the US.

Nam ? anybody?

Who sold? Well when the price started going up it was a lot of hedge funds buying in.

I think a lot of them are rotating out now to find greener pastures.

[midas]

In some parallel universe maybe but in this one China has a small fraction of the US Gold reserves.

http://en.wikipedia.org/wiki/Gold_reserve

LOL - Do you really believe in this numbers? If so, please tell me who can prove them.

Maybe until now you didn't read this http://www.bloomberg.com/news/2013-07-02/yuan-offshore-trade-race-picks-up-with-frankfurt-bid-currencies.html

How dare they? They are now clearly on the axis of evil list and USA will bomb them out of existence and change the regime..

oh wait……………

[yoshiwara]

Sorry, the article from Bloomberg I'd copy was not about Gold but to show you that China is going it's way to get the Yuan as the world reserve currency slowly but step by step. And about the Gold another word: Who do think sold all the Gold for beating the price down? And who do you think bought it? Why does it take America seven years to send this requested small amount of Gold back to his owner Germany, when they sell so many just only for beating the price down? The price they could beat with paper. All given numbers base on reports from the FED or Treasury only and that should make you thinking about.

More gold bug drivel.

[NeverSure]

China still seems to be doing OK. Not fantastic growth, but still very decent. They've done a pretty good job with avoiding any sort of hard landing. But time will tell. Lots of issues there and if China sneezes, the whole world will catch a cold.

Isn''t China tightening now what many said the US should have done years ago....

short term pain long term gain ...

No, China is in a major real estate bubble far worse than what the US was in. Those ghost cities are unlike anything the world has seen before and they are financed. They are also huge and empty. They have been counted as part of China's GDP but that has to stop at some point because the banks and shadows lenders are going to have to take a bath on them. At some point they have to be called losses.

China has been taking on massive debt as stimulus to keep its economy going and to make its GDP appear to be doing well.

My feeling is that China is broke. As someone rightly said, China manufactures crap except for what they directly make for Western countries which supervise the manufacturing. They have no technology of their own. They are providing cheap labor to make what others invented. That's not a formula for success because the inventors such as Nike and IPod make the real money.

For those who compared China to the US, perhaps you forget that the US has companies that are making lots of money off their inventions, even if made in China. There is no recession in Silicon Valley nor is there a housing slump. The economy in the US is starting to grow but China is digging a hole.

I think this will, at the least, be interesting.

[chiang mai]

I see that Thailand bashing is now out of style with you and that you've decided to bash China instead, they say that a change is as good as a rest!

And you say there is no housing slump in the US but there certainly was, values fell by a large amount but the spin machine would have us believe that prices are starting to recover. If that's the case then why are the lumber mills at an all time low in terms of output? And just who are these buyers that are allegedly moving the housing market, it's doesn't seem to be Joe Public, rumour has it that it's corporate and financial America that's doing much of the buying, hmmm, that can't be good.

But back to Nike and IPod making the real money, they're doing so because their manufacturing has been exported to a country where labour and other overhead costs are cheap, that's not very American now is it, and what's going to happen when China isn't cheap any more, nowehere to go springs to mind. Oh well, if China does eventually find itself strapped for cash, perhaps it can sell some of the US debt it's accumulated over the years, that'll be fun to watch!

[LawrenceChee]

China is not crashing ....they have enough reserves and projects to keep them going

Stupid if one bash them based on the quality of the produce since they are only making what the rest of the world is ordering

I just bought a 40baht toy car made in china for the it to crash to the wall and have fun with...are there more expensive options yes ...would I pay for it to crash at the furniture or everytime I go out to a mall or market nope.

They have 1.3 billion in population only 10 percent have hot middle class status and the reality is the growth potential rather than the spent forced in most

As for creativity and design they have never professed to be the best in that so I am or sure why the comparison ...every country is good at something and clearly design and technology is not one of theirs

They love making money and are good at it .....

[NeverSure]

I see that Thailand bashing is now out of style with you and that you've decided to bash China instead, they say that a change is as good as a rest!

And you say there is no housing slump in the US but there certainly was, values fell by a large amount but the spin machine would have us believe that prices are starting to recover. If that's the case then why are the lumber mills at an all time low in terms of output? And just who are these buyers that are allegedly moving the housing market, it's doesn't seem to be Joe Public, rumour has it that it's corporate and financial America that's doing much of the buying, hmmm, that can't be good.

But back to Nike and IPod making the real money, they're doing so because their manufacturing has been exported to a country where labour and other overhead costs are cheap, that's not very American now is it, and what's going to happen when China isn't cheap any more, nowehere to go springs to mind. Oh well, if China does eventually find itself strapped for cash, perhaps it can sell some of the US debt it's accumulated over the years, that'll be fun to watch!

I never know where to start with you. You get things so backwards that I don't know why I bother.

Sawmills are producing at a low because tree huggers have shut off much of the forests, and the US is buying most of its lumber from Canada, and lots of it.

Housing starts are way up. Home prices have increased about 10% in the past year. Where I live it's more like 20%. Sales to individuals are up substantially. Yes, there is still excess inventory to flush out but not nearly as much and home builders are starting to make money again with actual sales.

US companies are making lots of money but not spending it. Wealth is accumulating.

China has to have foreign reserves in dollars or it couldn't do business. The dollar is the international unit of trade. If China sold all of it's US denominated reserves, it would be out of business.

The dollar is increasing against other currencies.

But you don't, apparently, want to learn anything.

[chiang mai]

I stood and saluted the stars and stripes and sang god bless America as I read that NS!

BTW can you tell us please, teacher, what will happen to the US economy, equities and the value of USD when Uncle Ben stops proping up the economy with QE, will it no just go splat?

Edited July 5, 2013 by chiang mai

[Issangeorge]

If you want to know how China is doing look at how the Australian Dollar is doing. When China is doing well the Aussie Dollar is high and climbing. When China is doing poorly the Aussie Dollar is down and falling.

Sent from my i-mobile IQ 6 using Thaivisa Connect Thailand mobile app

[IMA_FARANG]

No China is not "crashing".

But it is coming out of a period where it's "economic miracle" will now have to face reality.

For example, China has been building to many hotels, apartments, etc. , and now using that construction to artificially inflate it's "growth" figures.

There are many "ghost towns" now in China, with new fancy buildings that are actually empty and can't be sold.

They overbuilt in their property sector, many wealthy Chinese bought "investment" property in those housing projects, and now they are starting to realize those "investments" are not going to be profitable.

It's called overbuilding and was not rational. China fueled it's growth and employment figures .... it's "economic miracle" .... with infrastructure and property spending that is unsustainable in the long run. A classic bubble situation.

Reality will set in soon.... it always does.

Bottom line ... China's economy was in a boom cycle .... growth rate that was unsustainable in the long run .... and now reality will have to sink into the growth perceptions.

But, there are developed economies, in Europe or in the U.S. that would just love to have the same problem as China does.

China's miracle just has to come back down to reality again.

Edited July 6, 2013 by IMA_FARANG

[craigt3365]

This is a pretty good article to read:

http://www.marketwatch.com/story/how-china-officials-obsession-drives-fudging-2013-06-25?dist=tcountdown

I trust the numbers coming out of China as much as I trust the ones reported by the Thai government. Not much.

Those ghost cities are scary. But this report has an interesting angle:

http://www.businessinsider.com/chinese-ghost-town-story-is-overblown-2013-3

[Naam]

This is a pretty good article to read:

http://www.marketwatch.com/story/how-china-officials-obsession-drives-fudging-2013-06-25?dist=tcountdown

I trust the numbers coming out of China as much as I trust the ones reported by the Thai government. Not much.

Those ghost cities are scary. But this report has an interesting angle:

http://www.businessinsider.com/chinese-ghost-town-story-is-overblown-2013-3

the ghost cities are only scary because 'journàsslistic' scaremasters depict them as scary.

reading what an old Asia hand has to say might be of more interest than listening to people who are disconnected from China.

http://en.wikipedia.org/wiki/Mark_Mobius

http://mobius.blog.franklintempleton.com/2013/05/08/chinas-building-but-will-they-come-the-space-race-2/#more-2631

[impulse]

This is a pretty good article to read:

http://www.marketwatch.com/story/how-china-officials-obsession-drives-fudging-2013-06-25?dist=tcountdown

I trust the numbers coming out of China as much as I trust the ones reported by the Thai government. Not much.

Those ghost cities are scary. But this report has an interesting angle:

http://www.businessinsider.com/chinese-ghost-town-story-is-overblown-2013-3

the ghost cities are only scary because 'journàsslistic' scaremasters depict them as scary.

reading what an old Asia hand has to say might be of more interest than listening to people who are disconnected from China.

http://en.wikipedia.org/wiki/Mark_Mobius

http://mobius.blog.franklintempleton.com/2013/05/08/chinas-building-but-will-they-come-the-space-race-2/#more-2631

While the information is okay, I try to remember 2 important things:

1) The guy and his company have a financial interest in the information he puts out.

2) His ability to continue to operate in China is contingent on not pissing off the folks that issue visas.

The problem with future occupation of the ghost cities is the price at which they were purchased. No countryside folks migrating to an urban life can afford them. That means that they will either stay vacant, or someone is going to take a huge writedown.

And, just like the US, Chinese banks have started getting involved in derivative products that leverage those losses through several levels. That's scarier than the empty cities themselves because you can't see that trainwreck coming. (BTW, the empty cities make great press, but more prevalent are the empty blocks, empty buildings and empty floors and dwellings scattered among all the cities).

Edited July 6, 2013 by impulse

[Naam]

His ability to continue to operate in China is contingent on not pissing off the folks that issue visas.

the "guy" is neither operating nor resident in China. his integrity, track of success and years of experience are above any doubts.

No countryside folks migrating to an urban life can afford them.

a decade ago none of any migrating countryside folks could afford a mobile phone. today there's no housemaid in Shanghai which does not have one.

fact: China needs every year 20-25 million flats (different sizes and prices). it is only a matter of time till the ghost cities and empty dwellings are occupied.

fact: China's political setup provides means to deal with a financial crisis other governments can only dream of. decisions are not procrastinated by endless yada yada debates in parliaments and ratifications in upper houses.

[trogers]

Here is an interesting quote from George Friedman's book - 'The Next 100 Years':

China is Japan (of the 1980s) on steriods. It is not only an Asian state that values social relations above economic discipline but a communist state that allocates money politically and manipulates economic data. It is also a state in which equity holders-demanding profits-are less important than bankers and government officials, who demand cash. Both economies rely heavily on exports, both have staggeringly high growth rates, and both face collapse when the growth rate begins even to barely slow.

Edited July 6, 2013 by trogers