Is China crashing?

[craigt3365]

without any doubt China is doomed. seven years ago i installed an irrigation pump (2½HP), price 4,000 Baht because i was not willing to pay 15,800 Baht for a top of the line Grundfos or a slightly cheaper U.S. made pump.

this pump runs 5 times 40 minutes (5 zones) approximately 280 days a year. last year i replaced a seal (handmade from a tube with sealant) because there was a slight leakage.

therefore my assumption that companies selling their products, which last many years, that cheap must be doomed.

L-dog vs.jpg

Glad it worked for you. We went with a major supplier of ceiling fans here in Thailand when we built our house. They had just switched to cheaper Chinese motors. The results were disastrous. Even their engineers who eventually came to our house from Bangkok to see the problem agreed. They eventually replaced 1/2 of our fans. And we're still having problems...3 years later.

Edit: These were the most expensive fans they had.

[LawrenceChee]

without any doubt China is doomed. seven years ago i installed an irrigation pump (2½HP), price 4,000 Baht because i was not willing to pay 15,800 Baht for a top of the line Grundfos or a slightly cheaper U.S. made pump.

this pump runs 5 times 40 minutes (5 zones) approximately 280 days a year. last year i replaced a seal (handmade from a tube with sealant) because there was a slight leakage.

therefore my assumption that companies selling their products, which last many years, that cheap must be doomed.

L-dog vs.jpg

Glad it worked for you. We went with a major supplier of ceiling fans here in Thailand when we built our house. They had just switched to cheaper Chinese motors. The results were disastrous. Even their engineers who eventually came to our house from Bangkok to see the problem agreed. They eventually replaced 1/2 of our fans. And we're still having problems...3 years later.

Edit: These were the most expensive fans they had.

It's a hit and miss when you buy a cheap product made anywhere in the world

People don't expect Boeing a reputable company to push thru a product with a faulty battery considering the price tag but it happened and similarly when you pick any item there is no virtual guarantee if it works as intended

My son went to the Talay and picked a 40 baht toy vs her mummy buying him 1500 baht Thomas the train from Robinson

He liked the 40 baht car better ..it probably won't last the next 3 months but at 40 baht entertainment to keep him running around priceless ...

There is good value in this low end production

The rest of the world and china who are not pretentious or printing money back home value them for the cost effectiveness of its intended purpose ...

[Naam]

without any doubt China is doomed. seven years ago i installed an irrigation pump (2½HP), price 4,000 Baht because i was not willing to pay 15,800 Baht for a top of the line Grundfos or a slightly cheaper U.S. made pump.

this pump runs 5 times 40 minutes (5 zones) approximately 280 days a year. last year i replaced a seal (handmade from a tube with sealant) because there was a slight leakage.

therefore my assumption that companies selling their products, which last many years, that cheap must be doomed.

L-dog vs.jpg

Lucky it was only a seal that broke, because you had to make one yourself as no spare parts were available, but it could have been another part which you couldn't produce yourself.

Anyway I'm glad you have a pump from China which you are satisfied with, don't mention those other Chinese item that broke down quickly and were unrepairable, but keep in mind one swallow doesn't make the summer.

i have and am using Chinese electronic gadgets and parts since many years without any problems. and, back to the pump, where would i have gotten a Grundfos seal for a 6-7 year old pump and how long would it have taken to get the part? till my lawn was yellow?

if a major part had broken down i would have switched and bought a new pump, perhaps more expensive for 6,000 Baht. but then i would be still ahead of Grundfos by 5,800 Baht and have a brand new pump.

remember our meeting "old Portwine and Inverters"? i could locate the Thai electrician who installed the electric protective gear in my house. my "personal engineer" talked to him and was told "no problem to construct an autoswitch". he is presently working on a job in the south and promised to visit me as soon as he is back.

the Chinese inverters i bought were each €UR 145 (5,800 Baht) and inspite of our initial skepsis they work to my full satisfaction. i don't know how much i will pay for an autoswitch. but definitely not a fortune that the total comes up to the fancy price of 21,000 Baht a company near BKK quoted an autoswitch inverter, not pure sinewave, with a meager 800 kVA capacity.

[jbrain]

without any doubt China is doomed. seven years ago i installed an irrigation pump (2½HP), price 4,000 Baht because i was not willing to pay 15,800 Baht for a top of the line Grundfos or a slightly cheaper U.S. made pump.

this pump runs 5 times 40 minutes (5 zones) approximately 280 days a year. last year i replaced a seal (handmade from a tube with sealant) because there was a slight leakage.

therefore my assumption that companies selling their products, which last many years, that cheap must be doomed.

L-dog vs.jpg

Glad it worked for you. We went with a major supplier of ceiling fans here in Thailand when we built our house. They had just switched to cheaper Chinese motors. The results were disastrous. Even their engineers who eventually came to our house from Bangkok to see the problem agreed. They eventually replaced 1/2 of our fans. And we're still having problems...3 years later.

Edit: These were the most expensive fans they had.

It's a hit and miss when you buy a cheap product made anywhere in the world

People don't expect Boeing a reputable company to push thru a product with a faulty battery considering the price tag but it happened and similarly when you pick any item there is no virtual guarantee if it works as intended

My son went to the Talay and picked a 40 baht toy vs her mummy buying him 1500 baht Thomas the train from Robinson

He liked the 40 baht car better ..it probably won't last the next 3 months but at 40 baht entertainment to keep him running around priceless ...

There is good value in this low end production

The rest of the world and china who are not pretentious or printing money back home value them for the cost effectiveness of its intended purpose ...

Now keep in mind that there is a high possibility that you bought that 40 Baht car way below cost price.

Reason is that many Chinese factories have a huge over production and need to sell their products at a loss to get rid of them.

Other products, like solar panels for example, are heavily subsidized by the Chinese government. So in fact those solar panels are sold at a loss and still they have a massive overstock, as most of the major Chinese solar companies are defunct already for that reason.

Selling at a loss isn't contributory to a healthy business plan

[LawrenceChee]

without any doubt China is doomed. seven years ago i installed an irrigation pump (2½HP), price 4,000 Baht because i was not willing to pay 15,800 Baht for a top of the line Grundfos or a slightly cheaper U.S. made pump.

this pump runs 5 times 40 minutes (5 zones) approximately 280 days a year. last year i replaced a seal (handmade from a tube with sealant) because there was a slight leakage.

therefore my assumption that companies selling their products, which last many years, that cheap must be doomed.

L-dog vs.jpg

Glad it worked for you. We went with a major supplier of ceiling fans here in Thailand when we built our house. They had just switched to cheaper Chinese motors. The results were disastrous. Even their engineers who eventually came to our house from Bangkok to see the problem agreed. They eventually replaced 1/2 of our fans. And we're still having problems...3 years later.

Edit: These were the most expensive fans they had.

It's a hit and miss when you buy a cheap product made anywhere in the world

People don't expect Boeing a reputable company to push thru a product with a faulty battery considering the price tag but it happened and similarly when you pick any item there is no virtual guarantee if it works as intended

My son went to the Talay and picked a 40 baht toy vs her mummy buying him 1500 baht Thomas the train from Robinson

He liked the 40 baht car better ..it probably won't last the next 3 months but at 40 baht entertainment to keep him running around priceless ...

There is good value in this low end production

The rest of the world and china who are not pretentious or printing money back home value them for the cost effectiveness of its intended purpose ...

Now keep in mind that there is a high possibility that you bought that 40 Baht car way below cost price.

Reason is that many Chinese factories have a huge over production and need to sell their products at a loss to get rid of them.

Other products, like solar panels for example, are heavily subsidized by the Chinese government. So in fact those solar panels are sold at a loss and still they have a massive overstock, as most of the major Chinese solar companies are defunct already for that reason.

Selling at a loss isn't contributory to a healthy business plan

True I agree from a business standpoint but they have learnt from the west this is capitalism at is best ...

Just sell it is better than having 500,000 in your warehouse doing nothing

[chiang mai]

The IMF is very positive:

http://www.telegraph.co.uk/finance/economics/10169070/IMF-upgrades-UK-growth-as-its-cuts-rest-of-the-world.html

(not that that means a whole bunch, but!)

[trogers]

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 falsification of statistics is not surprising news in China. Why is that?

Here is the answer: Huge zombie companies owned by local governments.

Not to be outdone China has its own huge state owned banks that are propping up zombie state owned companies with subsidized capital. Of the largest central enterprises more than two thirds lost money in the first half of 2012, yet there is never any discussion of insolvency. Often the zombie company is owned by a local government who can keep it alive with cheap loans from local branches of large state owned banks. The problem is that these local governments are heavily indebted. They borrowed 10.7 trillion yuan ($1.7 trillion) and after a brief slow down have started again increasing their borrowing 148% since 2011.

Central bankers have insisted that their policies of ultra lose money have been successful in preventing a more serious downturn. No doubt this is true, but treating symptoms is not a cure. In the process they have also managed to kill growth.

http://seekingalpha.com/instablog/355660-william-gamble/1469511-zombie-companies-how-central-bankers-are-killing-growth

[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 falsification of statistics is not surprising news in China. Why is that?

Here is the answer: Huge zombie companies owned by local governments.

Not to be outdone China has its own huge state owned banks that are propping up zombie state owned companies with subsidized capital. Of the largest central enterprises more than two thirds lost money in the first half of 2012, yet there is never any discussion of insolvency. Often the zombie company is owned by a local government who can keep it alive with cheap loans from local branches of large state owned banks. The problem is that these local governments are heavily indebted. They borrowed 10.7 trillion yuan ($1.7 trillion) and after a brief slow down have started again increasing their borrowing 148% since 2011.

Central bankers have insisted that their policies of ultra lose money have been successful in preventing a more serious downturn. No doubt this is true, but treating symptoms is not a cure. In the process they have also managed to kill growth.

http://seekingalpha.com/instablog/355660-william-gamble/1469511-zombie-companies-how-central-bankers-are-killing-growth

They borrowed 10.7 trillion yuan ($1.7 trillion)

an amount the author and contributor of "seekingalpha" Mr William Gamble has personally counted and verified

[yoshiwara]

My Casio (made in China) calculator and Lenovo laptop...should I bin them now?

Edited July 10, 2013 by yoshiwara

[trogers]

My Casio (made in China) calculator and Lenovo laptop...should I bin them now?

No. You can keep using them like I have continued using my Corolla in 1990 even when the Japanese economy tanked. But tanked that economy did even though their cars are still good.

[churchill]

The China slowdown effect

http://blogs.ft.com/beyond-brics/2013/07/11/the-china-slowdown-effect-near-and-far/?utm_source=Sinocism+Newsletter&utm_campaign=c8091e0c27-Sinocism07_12_13&utm_medium=email&utm_term=0_171f237867-c8091e0c27-1820733#axzz2YnhAjKrl

[yoshiwara]

The China slowdown effect

http://blogs.ft.com/beyond-brics/2013/07/11/the-china-slowdown-effect-near-and-far/?utm_source=Sinocism+Newsletter&utm_campaign=c8091e0c27-Sinocism07_12_13&utm_medium=email&utm_term=0_171f237867-c8091e0c27-1820733#axzz2YnhAjKrl

Last sentence: 'China's slowdown is anything but simple'.

[trogers]

JP Morgan analysts hit a similar vein when they compare modern day China to Japan in the 1980s. Older readers will remember that Japan then, much like China today, was touted as the next economic superpower, with the United States in decline. As its credit bubble burst, its stock market and real estate collapsed and its GDP growth slowed. Japan never reached the top. JP Morgan analysts think the same could be true for China.

Many commentators point to China’s large holding of foreign exchange reserves and say that this should help prevent or lessen the burden of debt-deflation. But even this situation is eerily familiar to Japan in the 1980s.

“The current account surplus and large foreign exchange reserves provide a cushion against possible adverse shocks. Interestingly, these mitigating factors also existed in Japan in the late 1980s.” As history showed, they did not help to avoid the consequences of a debt bubble and decades of bad economic policy.

http://www.theepochtimes.com/n3/202808-china-economy-shows-cracks/

[NeverSure]

I continue to say that I wish economists wouldn't include government spending the the GDP number. That's especially true of deficit government spending. This can fool the unsophisticated investor.

A country, like China, that is going deeply into debt with stimulus spending, and shows an increase year over year in GDP of about 7% while 23% of its GDP is government spending.

"Government spending amounts to 23.6 percent of GDP. Public debt has decreased, but large amounts of debt are held in off-budget obligations. Slower growth may undermine fiscal policy." LINK

"...but large amounts of debt are held in off-budget obligations." This is its shadow banking system which makes a lot of loans for things like ghost cities, all debt spending but off budget, but included in the GDP.

China is crashing. Only debt driven spending is holding it together. And it doesn't have the engine of the West in owning big amounts of technology. It picks up the scraps by manufacturing technology for companies like Apple who make the real money.

Lenovo? That's just the IBM computer business that China bought so it would have its own brand of computer, and they still have mostly US designed components such as Intel processors, Windows 8, video, etc. And they are way overpriced.

Also, China's "one child per family" policy is going to bite it in the ass as they fail to find cheap workers in this next generation.

[Dancealot]

Migrant workers and cheap labour vs government(company) spending.

Sad to see the large company's determine where all profits go. Very inhumane.

[wellred]

This is great news if true. Hopefully if they experience a big crash they will stop acting like such babies.

[NCC1701A]

From Stratfor:

"Recognizing the End of the Chinese Economic Miracle"

http://www.stratfor.com/weekly/recognizing-end-chinese-economic-miracle?utm_source=freelist-f&utm_medium=email&utm_campaign=20130723&utm_term=Gweekly&utm_content=readmore&elq=3256d869cf794980b9d3f989ced55ada

[canman]

From Stratfor:

"Recognizing the End of the Chinese Economic Miracle"

http://www.stratfor.com/weekly/recognizing-end-chinese-economic-miracle?utm_source=freelist-f&utm_medium=email&utm_campaign=20130723&utm_term=Gweekly&utm_content=readmore&elq=3256d869cf794980b9d3f989ced55ada

Excellent article. No hyperbole, just facts and some logical connections.

[Naam]

From Stratfor:

"Recognizing the End of the Chinese Economic Miracle"

http://www.stratfor.com/weekly/recognizing-end-chinese-economic-miracle?utm_source=freelist-f&utm_medium=email&utm_campaign=20130723&utm_term=Gweekly&utm_content=readmore&elq=3256d869cf794980b9d3f989ced55ada

Excellent article. No hyperbole, just facts and some logical connections.

Stratfor - the leader in the field of global intelligence

Stratfor - forecasted 9 years ago crude oil <$10/barrel

Stratfor - announced 2004 Venezuela default within months

Stratfor - forecasted since 5 years "bunker busters on Iran imminent"

Stratfor - wasted 349 Dollars subscription per year

[craigt3365]

From Stratfor:

"Recognizing the End of the Chinese Economic Miracle"

http://www.stratfor.com/weekly/recognizing-end-chinese-economic-miracle?utm_source=freelist-f&utm_medium=email&utm_campaign=20130723&utm_term=Gweekly&utm_content=readmore&elq=3256d869cf794980b9d3f989ced55ada

Excellent article. No hyperbole, just facts and some logical connections.

Stratfor - the leader in the field of global intelligence

Stratfor - forecasted 9 years ago crude oil <$10/barrel

Stratfor - announced 2004 Venezuela default within months

Stratfor - forecasted since 5 years "bunker busters on Iran imminent"

Stratfor - wasted 349 Dollars subscription per year

About as good as Zero Hedge? 5555

[CPH]

From Stratfor:

"Recognizing the End of the Chinese Economic Miracle"

http://www.stratfor.com/weekly/recognizing-end-chinese-economic-miracle?utm_source=freelist-f&utm_medium=email&utm_campaign=20130723&utm_term=Gweekly&utm_content=readmore&elq=3256d869cf794980b9d3f989ced55ada

Excellent article. No hyperbole, just facts and some logical connections.

Stratfor - the leader in the field of global intelligence

Stratfor - forecasted 9 years ago crude oil <$10/barrel

Stratfor - announced 2004 Venezuela default within months

Stratfor - forecasted since 5 years "bunker busters on Iran imminent"

Stratfor - wasted 349 Dollars subscription per year

About as good as Zero Hedge? 5555

How should China go down. It is the worlds producer of consumer goods. They hold huge reserves in foreign currency. As of the end of 2012, the China reserve holds $3.3 trillion,^[1] making it the highest foreign exchange reserve in the world and far exceeded holdings of the next largest holder, Japan (~$1 trillion). (Quote wiki). China holds approximately 2 trillion $ in US bonds. They hold the future of US in their hands and could ruin US by starting to sell these bonds and thereby bringing US interest rates to a very high level and an immediate recession.

[lovetotravel]

How should China go down. It is the worlds producer of consumer goods. They hold huge reserves in foreign currency. As of the end of 2012, the China reserve holds $3.3 trillion, ^{making it the highest foreign exchange reserve in the world and far exceeded holdings of the next largest holder, Japan (~$1 trillion). (Quote wiki). China holds approximately 2 trillion $ in US bonds. They hold the future of US in their hands and could ruin US by starting to sell these bonds and thereby bringing US interest rates to a very high level and an immediate recession.}

Why would China do anything to hurt their bond investments? Trying to "ruin" the US would only "ruin" their investments. A no win situation. The last thing China wants is for the US to stop buying their cheap goods and put them into an immediate recession. Right?

[ajarnpot]

It will certainly be interesting to find out what happens to all the gdp inflating bridges, hospitals buildings that are empty. I guess being empty means less maintainance costs, but will still requrie some sort of upkeep

[Naam]

From Stratfor:

"Recognizing the End of the Chinese Economic Miracle"

http://www.stratfor.com/weekly/recognizing-end-chinese-economic-miracle?utm_source=freelist-f&utm_medium=email&utm_campaign=20130723&utm_term=Gweekly&utm_content=readmore&elq=3256d869cf794980b9d3f989ced55ada

Excellent article. No hyperbole, just facts and some logical connections.

Stratfor - the leader in the field of global intelligence

Stratfor - forecasted 9 years ago crude oil <$10/barrel

Stratfor - announced 2004 Venezuela default within months

Stratfor - forecasted since 5 years "bunker busters on Iran imminent"

Stratfor - wasted 349 Dollars subscription per year

About as good as Zero Hedge? 5555

there is a difference. "null hedge" presents mole hills in a sensationalist way as mountains. "stratfor" has a right wing plus a pro bias on .

[Naam]

How should China go down. It is the worlds producer of consumer goods. They hold huge reserves in foreign currency. As of the end of 2012, the China reserve holds $3.3 trillion, ^{making it the highest foreign exchange reserve in the world and far exceeded holdings of the next largest holder, Japan (~$1 trillion). (Quote wiki). China holds approximately 2 trillion $ in US bonds. They hold the future of US in their hands and could ruin US by starting to sell these bonds and thereby bringing US interest rates to a very high level and an immediate recession.}

Why would China do anything to hurt their bond investments? Trying to "ruin" the US would only "ruin" their investments. A no win situation. The last thing China wants is for the US to stop buying their cheap goods and put them into an immediate recession. Right?

China's exports to the U.S. are highly overrated!

the USD surplus is mainly caused by exporters invoicing in USD.

[CPH]

How should China go down. It is the worlds producer of consumer goods. They hold huge reserves in foreign currency. As of the end of 2012, the China reserve holds $3.3 trillion, ^{making it the highest foreign exchange reserve in the world and far exceeded holdings of the next largest holder, Japan (~$1 trillion). (Quote wiki). China holds approximately 2 trillion $ in US bonds. They hold the future of US in their hands and could ruin US by starting to sell these bonds and thereby bringing US interest rates to a very high level and an immediate recession.}

Why would China do anything to hurt their bond investments? Trying to "ruin" the US would only "ruin" their investments. A no win situation. The last thing China wants is for the US to stop buying their cheap goods and put them into an immediate recession. Right?

You are right. I was just trying to show how much power China has. they are not going to go down, they will be the number 1 economy in the world one day not so far away.

[Naam]

It will certainly be interesting to find out what happens to all the gdp inflating bridges, hospitals buildings that are empty. I guess being empty means less maintainance costs, but will still requrie some sort of upkeep

nothing much will happen. sooner or later all "ghost" infrastructure will be used respectively occupied. as simple as that.

[ThaiSETtrader]

As far as I am aware, a few months ago all the talk was of the Chinese economy overheating so the government began to take steps to prevent this and move the economy away from being dominated by exports. A few months later and there is a talk of a crash. Whilst recognizing that less than 6% growth would be harmful (and hence the recently announced targeted stimulus measures), surely this current state of the economy is a result of an intentional, planned and necessary shift in economic policy.

Maybe it is not all doom and gloom but rather China is readjusting it economy to focus on the growth of its internal market and come back even stronger.

[trogers]

It will certainly be interesting to find out what happens to all the gdp inflating bridges, hospitals buildings that are empty. I guess being empty means less maintainance costs, but will still requrie some sort of upkeep

nothing much will happen. sooner or later all "ghost" infrastructure will be used respectively occupied. as simple as that.

(/quote)

And who shall acquire them and at what prices? Or will they be taken over through communistic means for the Good of the State? Who will clear the debts (+ accrude interests) that were borrowed on peak bubble prices? And who have to bear the losses if debts cannot be cleared?

Edited July 26, 2013 by trogers

[Naam]

It will certainly be interesting to find out what happens to all the gdp inflating bridges, hospitals buildings that are empty. I guess being empty means less maintainance costs, but will still requrie some sort of upkeep

nothing much will happen. sooner or later all "ghost" infrastructure will be used respectively occupied. as simple as that.

(/quote)

And who shall acquire them and at what prices? Or will they be taken over through communistic means for the Good of the State? Who will clear the debts (+ accrude interests) that were borrowed on peak bubble prices? And who have to bear the losses if debts cannot be cleared?

straight answer to your questions... neither you nor me. it is also neither our or the many gloom&doom gurus' business to advise the Chinese leadership how to proceed. one way or the other a solution will be found even if that solution starts with a big bang affecting other countries too.

only a decade ago a number of countries were in much worse shape than China and only ignorants think the Chinese are suckers. that applies especially to ignorants who live in Asia and pretend they are blind.