Deflation leaves China on the brink of financial crisis

[hhgz]

A year ago, predicated on the Chinese threat to stop pegging the RMB to the USD - and use a market basket of various foreign currencies - all of you were gleefully predicting the crash of the USD, and the rise of the RMB. Along with the prediction of gold at $3000/oz, both predictions were nonsensical.

Edited January 13, 2015 by hhgz

[Credo]

The scenario I presented on just Chiangmai alone is factual and not some hallucinating visions

The Chinese disappearing in Thailand would just mean the rise back of the rude drunken louts or Russians which I personally think is more distasteful

I think while the Thais may find certain Chinese habits unpleasant ...there is no denying at least there is money to clear off the table with them rather than wipe vulgarities and puke off the floor of drunks

Your scenario maybe factual, but it may not be entirely correct. When the Chinese leave, there is another group waiting to come in. CM is a tourist destination, if there are rooms available and there is a little marketing, other groups will fill the void.

If the Chinese slowdown affects larger swaths of Asia then your scenario starts to speed up.

I, for one, don't go to CM often because of the Chinese. I have nothing against the Chinese, but the last time I called to book a room, it was filled with tour groups from China.

All that said, China and the Chinese are pretty resourceful folks and very, very few are more than a generation from some very real hardship. The people of China with weather the storm, but I am not so sure the gov't will have it quite so easy.

[MrWorldwide]

A year ago, predicated on the Chinese threat to stop pegging the RMB to the USD - and use a market basket of various foreign currencies - all of you were gleefully predicting the crash of the USD, and the rise of the RMB. Along with the prediction of gold at $3000/oz, both predictions were nonsensical.

Stick around

Pretty much standard practice here to predict various bubbles bursting - Thai real estate and the baht being the most common targets, but we'll have a stab at broader issues like the world economy when the situation calls for it. I've posted links to xe.com graphs that vividly illustrate that every major home currency represented here - GBP, USD, EUR, AUD - has been significantly devalued against the baht over the last 10 years, but hope springs eternal for another 97-style correction. Seems the prospect of getting 80 baht to the pound is more important than being able to live among people with food on the table and some hope for the future. Anyone who genuinely wants to see China fail - politically or economically - really needs to be careful what they wish for : they're already talking about the Aussie falling as low as 50 cents US and I'm sure that's the tip of the iceberg for any country in this region which relies on exports to China for a large part of it's standard of living.

[Robert24]

@Publicus: re your statement that an Economic crash would mainly impact China itself and East Asia, I think you completely underestimate 1) how interconnected the Global economy has become and 2) how important China has become as a Global growth engine. If there will be an economic contraction in China, believe me you will have an ugly Global recession. If the economic contraction in China comes in form of a financial collapse, it will get even more uglier everywhere. Most Global companies not only produce significant amounts of goods in China but also sell a lot of goods in China, and the growing amount of spending power of Chinese consumers is hugely important to the Global economy. Have a look at the Global car makers, food producers, producers of electronic goods, etc etc., for many of them China is either their no 1 market globally or amongst the top 3.

This is not in keeping with grandfathers opinion of all things Asian, "China's system can't work long term because they are copiers rather than innovators. They have been working at cheap rates for their Masters which are the Western countries."

Yes they did copy a lot of things but they are more and more inventing new things as well. Just wait, a lot of Great Chinese companies are coming. Have a look at a Alibaba for instance. Also they are damn good at manufacturing things otherwise Global companies wouldn't move production to China.

[Robert24]

@publicus: thanks for your answer. With regards to property price decline in BNPs report of 10% is because I have my doubts about the accuracy of that data. I assume you frequently travel to China as well and see that the economies in the different provinces are very different, saying you could have an increase of property prices in Beijing of 5%, Fujan might be flat and simultanously you may see a decline in Sichuan by 10%. So to just say it's gone down by 10% doesn't give you much insight into the property market.

Now with regards to the demographics of China. I agree in the long run they may run into a problem, say in 20-30 years time from now when it really starts to hurt the ratio between the working population and retirees will peak. But certainly not now. There is no shortage of labour available, there are plenty of migrants available that can move into areas where they work in manufactoring. Actually I think other countries like Japan or most European countries have a much more near term problem with demographics than China.

One other thing you keep referring to 'PR Chinese', or 'CCP's GDP vs US GDP', I think these terms are not helpful. It's fine if you just refer to Chinese or Chinese GDP, people tend not to use those terms. I obviously know what you mean.

Now about Shadow banking: In general I don't think shadow banking is such a bad thing and if you look what happened in established economies, you also see that regulations and new capital requirements have led to banks getting rid of huge amounts of assets from their balance sheets which ended up with asset managers, hedge funds and other institutions that are less regulated. This in itself hasn't made the financial system more stable, but it did make banks more stable and probably has taken some leverage out of the system. In China you refer to 40% debt of GDP in the shadow banking sector which may or may not be a problem. People keep referring to it as an issue, I'm not sure if it is. Would you feel more comfortable if this debt would move to the regulated banks? Not sure about it.

Hope this gives a little bit different perspective on China. I think your views are overly negative on China and you underestimate their capability to address issues and pro-actively steer their economy towards a more consumption led economy rather than mainly investment led.

Now about Shadow banking: In general I don't think shadow banking is such a bad thing

It's been a long long time since I've seen such an absolute 100% shameless apologist for anything, much less the CCP Boyz in Beijing and their whacko systems and schemes.

So what is your argument here aside from throwing words like "CCP boyz" and "whacko systems and schemes" around? What is your view of the shadow banking system in China vs Western countries?

[LawrenceChee]

@Publicus: re your statement that an Economic crash would mainly impact China itself and East Asia, I think you completely underestimate 1) how interconnected the Global economy has become and 2) how important China has become as a Global growth engine. If there will be an economic contraction in China, believe me you will have an ugly Global recession. If the economic contraction in China comes in form of a financial collapse, it will get even more uglier everywhere. Most Global companies not only produce significant amounts of goods in China but also sell a lot of goods in China, and the growing amount of spending power of Chinese consumers is hugely important to the Global economy. Have a look at the Global car makers, food producers, producers of electronic goods, etc etc., for many of them China is either their no 1 market globally or amongst the top 3.

This is not in keeping with grandfathers opinion of all things Asian, "China's system can't work long term because they are copiers rather than innovators. They have been working at cheap rates for their Masters which are the Western countries."

Yes they did copy a lot of things but they are more and more inventing new things as well. Just wait, a lot of Great Chinese companies are coming. Have a look at a Alibaba for instance. Also they are damn good at manufacturing things otherwise Global companies wouldn't move production to China.

Have a look at the company Xiaomi ....it combined the looks of Apple and functionality of an Andriod phone and did something Samsung & Apple could not do

Create a premium product with features and looks wanted by consumers and at an affordable price 1/3 of both Apple / Samsung starting at $300.

No wonder in 4 years of their operations they have now surpassed both market innovators in China and basically replicating that in India and Indonesia and gaining fast ground..

Their introduction to the market forces Apple to experiment with the colorful 5c and Samsung Alpha model but they could not replicate the functions and design and speed of the processor at the same price

I just introduced Taibao to a few friends who work at Amazon and while the basic model is rather identical ....there are a few functions that Taobao can do that Amazon users cannot

Of course it helps if you can read or write Mandarin ...

Edited January 13, 2015 by LawrenceChee

[Publicus]

"Socialism anyway is not about a social safety net."

That's the most ignorant thing I've heard all day. But keep trying, it's only 7am here...

So you stayed up all night to post and to do it on the dot, very good.

Don't confuse social democracy and socialism, that's all.

I like your posts btw but the standard presumptuous scold about communist government and economics delivered to us over a long period of time is rightfully rejected, always.

Marxism is a socio-economic moral anarchy, a utopia, absent formal governance. Lenin imposed the state on Marxist socio-economics, giving it 1000 years of Russian tsarism and making the state supreme over the individual and all else. The communist internationale is something else again.

When I wuz living and working in the PRChina members of the CP that I knew always mentioned the internationale in the recitation of their party lines. I noted to each of 'em that the internationale is currently China, Cuba, Albania, North Korea, maybe Vietnam, perhaps Laos and for good measure throw in Vermont and Marseille.

[SiSePuede419]

"Now about Shadow banking: In general I don't think shadow banking is such a bad thing..."

Sure, as long as you don't think a bubble popping draining trillions out of the World's economy is a "bad thing"?

Shadow bankers were the cause of the 2008 crash, bro.

Unregulated derivatives.

BTW, these financial "geniuses" who create these "products", largely "consumed" by individuals with annual incomes of $20+ million, create no new products that actually improve the average person's life.

Really, these people are just leaches.

Vampire squids sucking off the face of the world's economy...

Edited January 13, 2015 by SiSePuede419

[thailiketoo]

"Now about Shadow banking: In general I don't think shadow banking is such a bad thing..."

Sure, as long as you don't think a bubble popping draining trillions out of the World's economy is a "bad thing"?

Shadow bankers were the cause of the 2008 crash, bro.

Unregulated derivatives.

BTW, these financial "geniuses" who create these "products", largely "consumed" by individuals with annual incomes of $20+ million, create no new products that actually improve the average person's life.

Really, these people are just leaches.

Vampire squids sucking off the face of the world's economy...

I thought shadow banking was like Thailand's "share" thing. People get together like a club and loan one another money. No?

[Publicus]

@publicus: thanks for your answer. With regards to property price decline in BNPs report of 10% is because I have my doubts about the accuracy of that data. I assume you frequently travel to China as well and see that the economies in the different provinces are very different, saying you could have an increase of property prices in Beijing of 5%, Fujan might be flat and simultanously you may see a decline in Sichuan by 10%. So to just say it's gone down by 10% doesn't give you much insight into the property market.

Now with regards to the demographics of China. I agree in the long run they may run into a problem, say in 20-30 years time from now when it really starts to hurt the ratio between the working population and retirees will peak. But certainly not now. There is no shortage of labour available, there are plenty of migrants available that can move into areas where they work in manufactoring. Actually I think other countries like Japan or most European countries have a much more near term problem with demographics than China.

One other thing you keep referring to 'PR Chinese', or 'CCP's GDP vs US GDP', I think these terms are not helpful. It's fine if you just refer to Chinese or Chinese GDP, people tend not to use those terms. I obviously know what you mean.

Now about Shadow banking: In general I don't think shadow banking is such a bad thing and if you look what happened in established economies, you also see that regulations and new capital requirements have led to banks getting rid of huge amounts of assets from their balance sheets which ended up with asset managers, hedge funds and other institutions that are less regulated. This in itself hasn't made the financial system more stable, but it did make banks more stable and probably has taken some leverage out of the system. In China you refer to 40% debt of GDP in the shadow banking sector which may or may not be a problem. People keep referring to it as an issue, I'm not sure if it is. Would you feel more comfortable if this debt would move to the regulated banks? Not sure about it.

Hope this gives a little bit different perspective on China. I think your views are overly negative on China and you underestimate their capability to address issues and pro-actively steer their economy towards a more consumption led economy rather than mainly investment led.

Now about Shadow banking: In general I don't think shadow banking is such a bad thing

It's been a long long time since I've seen such an absolute 100% shameless apologist for anything, much less the CCP Boyz in Beijing and their whacko systems and schemes.

So what is your argument here aside from throwing words like "CCP boyz" and "whacko systems and schemes" around? What is your view of the shadow banking system in China vs Western countries?

In China you refer to 40% debt of GDP in the shadow banking sector which may or may not be a problem. People keep referring to it as an issue, I'm not sure if it is. Would you feel more comfortable if this debt would move to the regulated banks? Not sure about it.

Your wording is ambiguous not to mention convoluted. You write, "In China you refer to 40% debt of GDP in the shadow banking sector." If you mean the CCP shadow banking system equals 40% of existing GDP you'd be wrong (40% + 60% = 100%, not).

Whatever you wrote does anyway need clarification. Specifically, shadow banking in the PRC equals 40% of GDP. That is, GDP (100%) plus 40% more added to it by the shadow banking system. Meaning, GDP is 100% then add to that 40% of GDP for shadow banking. That's 100% + 40% = 140%. FYI shadow banking in the PRC is off the books and also is not included in GDP calculations or reports.

We get the numbers concerning shadow banking in China from several sources to include the US Treasury Department, the CIA and others. Let's just look however at the Financial Stability Board in London which was established by the G-20 after the 2008 US financial crash. The FSB does the math of everyone's finances to try to preclude another 2008 kind of crash swooping down on us again. The FSB looks at everything, everywhere, so it is fairly versed in the PRC shadow banking system.

You'd need to advise me concerning what you mean when you write above, " I don't think shadow banking is such a bad thing and if you look what happened in established economies, you also see that regulations and new capital requirements have led to banks getting rid of huge amounts of assets from their balance sheets which ended up with asset managers, hedge funds and other institutions that are less regulated."

I say in other words, you'd have to square up with the FSB which experts in Beijing say itself is behind the curve on shadow banking in the PRC. While the FSB says shadow banking in China amounts to $3 Trillion, the Chinese Academy of Social Sciences, which has a rare immunity to be somewhat if cautiously frank, says it's more like $6.54 Trillion. So what are the differences and similarities between the CCP's shadow banking system and those you say exist in "established economies." And why pray tell do you say "I don't think shadow banking is such a bad thing."

[Robert24]

"Now about Shadow banking: In general I don't think shadow banking is such a bad thing..."

Sure, as long as you don't think a bubble popping draining trillions out of the World's economy is a "bad thing"?

Shadow bankers were the cause of the 2008 crash, bro.

Unregulated derivatives.

BTW, these financial "geniuses" who create these "products", largely "consumed" by individuals with annual incomes of $20+ million, create no new products that actually improve the average person's life.

Really, these people are just leaches.

Vampire squids sucking off the face of the world's economy...

I think you confuse the US credit bubble that burst in 2008 with the LTCM debacle in 1998. The 2008 financial crisis was caused by banks through over-extending credit mainly on the mortgage markets and then securitising them, re-packiging, reselling them as AAA papers. So those subprime loans were repackaged at completely wrong price levels which led ultimately to the bubble that burst in 2008. Participants were regulated banks and regulated rating agencies - hardly any shadow banking participants involved. However since the 2008 crisis, the shadow banking market in the US and Europe has grown significantly since the regulated banks faced a lot scrutiny on capital regulations and proprietary trading regulations, so many banks offloaded huge parts of their balance sheets to hedge funds and asset managers.

[Robert24]

@Publicus: So in terms of the shadow banking market, let me explain this with an example. Prior to 2008/2009 most banks were heavily involved in proprietary trading, especially also in debt/credit trading. So they bought/sold NPL portfolios, subprime mortgage portfolios etc etc. Most of the market participants in credit/debt trading were regulated banks. Now with Dodd Frank and increased capital regulations under Basel III and so on, most banks have completely given up on proprietary trading and have sold significant amounts of assets from their balance sheets to hedge funds, asset managers and other corporations. So huge amounts of debt has moved from regulated banks to the shadow banking market in the US, Europe and Asia. Economists have different opinions whether this is good or not good. The advantage is that if it with a bank, it is more transparent, we think we can control it better, the downside is what we have seen in 2008 is that if they are wrongly priced and you end up with huge losses, it may bring entire banks and ultimately the financial system to a collapse. Whereas if those positions are with hedge funds and asset managers, people assume that it's mainly investors that loose their money and not entire banks are at risk. But it has become less transparent. So to give you a random example. Let's assume Goldman used to trade significantly in student loans, having say $20bn of student loans on their books prior to 2008/2009. Now they sold off those positions to a hedge fund who continues the exact same business which Goldman has shut down. Personally I'm not sure whether the position is better sitting in a portfolio at a hedge fund or asset manager vs a bank like Goldman - that's what I'm saying.

To go back to the China debate. So you seem to think the shadow banking market is much larger than the amounts published, personally I don't know. But what I'm saying is you won't make the Chinese financial system more stable by moving those debt positions from the shadow banking market to the regulated banks. Which is ultimately exactly the opposite of what was done in the rest of the world since 2008. In China the main reason for the shadow banking market is that it is very hard for smaller corporations to obtain loans, so they go through other corporations/asset managers etc who extend them loans. Now is that a bad thing? Not sure, I think the main concern is that we lack transparency, not the fact that non-regulated entities extend loans.

the part about your debt/GDP calculations I couldn't follow. Can you help me understand why you add debt to GDP? Usually total debt is measured against the GDP of a country as ratio. But debt or an annual increase in debt is not added to GDP calculations - these are completely different types of measures. Or did I misunderstand your point?

[Publicus]

"Now about Shadow banking: In general I don't think shadow banking is such a bad thing..."

Sure, as long as you don't think a bubble popping draining trillions out of the World's economy is a "bad thing"?

Shadow bankers were the cause of the 2008 crash, bro.

Unregulated derivatives.

BTW, these financial "geniuses" who create these "products", largely "consumed" by individuals with annual incomes of $20+ million, create no new products that actually improve the average person's life.

Really, these people are just leaches.

Vampire squids sucking off the face of the world's economy...

I think you confuse the US credit bubble that burst in 2008 with the LTCM debacle in 1998. The 2008 financial crisis was caused by banks through over-extending credit mainly on the mortgage markets and then securitising them, re-packiging, reselling them as AAA papers. So those subprime loans were repackaged at completely wrong price levels which led ultimately to the bubble that burst in 2008. Participants were regulated banks and regulated rating agencies - hardly any shadow banking participants involved. However since the 2008 crisis, the shadow banking market in the US and Europe has grown significantly since the regulated banks faced a lot scrutiny on capital regulations and proprietary trading regulations, so many banks offloaded huge parts of their balance sheets to hedge funds and asset managers.

Banks in China, every one of which belongs to the CCP Boyz in Beijing, have not "offloaded" anything on anyone in any way. Nor does the China state banking system or banks deal at all or in any way with the Chinese shadow banking system. The two are separate, independent, unrelated.

There aren't any shadow banks, not literally. There are no bank buildings to go to, no institutions of fiance such as a bank or a hedge fund, Shadow banking in the PRC are banking activities, but they occur outside of banks or any financial institution. It's just that if you did build a building around shadow banking activities, you would indeed have a bank, but you in fact don't have one or any such thing.

For example, the proprietary Chan Company that makes Chinese junk widgets is profitable. It takes part of its profit to privately and personally lend money to another company that can't get a loan from a state bank. The interest rate is in the neighborhood of 20%. It turns out however, that the lender Chan company gets between one-third to two-thirds of its actual Chan company profits from this activity. The Chan company is a participant in the PRC shadow banking system as is the borrower.

Borrowers need and have guarantors. Borrowers are in turn always guarantors of their guarantors borrowings. When no one can pay, the whole system collapses. Which is where the PRChina is presently.

The core of the problem is that the state banks lend to the state owned corporations only, and every bank in the PRC is a state owned bank. The state banks are prohibited lending to capitalist private businesses and corporations. So shadow banking lends to the capitalist proprietary business and corporations. Until ten or so years ago shadow banking had lent to individuals. But because a number of PRChinese wanted to establish their own businesses, they turned to the shadow banking system to get the capital they needed, and continue to need.

Shadow banking has grown exponentially during the past ten or so years to its present humongous amounts and extent, $6,5 Trillion, all of it off the books and not included in the official GDP data. It has come to include wealth management products and the like, and the shadow "bankers" move your money offshore when you yourself decide to flee with the company funds.

Trying to say there is CCP shadow banking in "established economies" or its equivalent in the West is vacuous. The reality is the CCP is the opposite of the West. The Boyz in Beijing are pondering moving the $6.5 Trillion on to the books of its state banks in hopes of getting rid of it in that way. It will be an interesting circus act to watch. Expect lots of thrills, chills, spills.

[LawrenceChee]

People's lives and their savings , dreams and aspirations are at at risks when an entire country sinks ....it's times like these when strangely speaking , being a communist works better than the West

They have grown too big and come too far to sink it and be bloodied in history books as the President that sunk China

President Xi and Premier Li shoulders the burden of trying to resolve this so that every generation of CCP leaders would not be remembered as the leaders who let down the Chinese

They have no bi partisan politics to fight , they have the resources to make unilateral decisions and this is where true leaders are made ..everything is your disposal ...make a wrong decision and be remembered as the failure for yourself and your family name

[thailiketoo]

People's lives and their savings , dreams and aspirations are at at risks when an entire country sinks ....it's times like these when strangely speaking , being a communist works better than the West

They have grown too big and come too far to sink it and be bloodied in history books as the President that sunk China

President Xi and Premier Li shoulders the burden of trying to resolve this so that every generation of CCP leaders would not be remembered as the leaders who let down the Chinese

They have no bi partisan politics to fight , they have the resources to make unilateral decisions and this is where true leaders are made ..everything is your disposal ...make a wrong decision and be remembered as the failure for yourself and your family name

Is this also true about Mao killing 40 million Chinese in Mao's great famine?

[Publicus]

@Publicus: So in terms of the shadow banking market, let me explain this with an example. Prior to 2008/2009 most banks were heavily involved in proprietary trading, especially also in debt/credit trading. So they bought/sold NPL portfolios, subprime mortgage portfolios etc etc. Most of the market participants in credit/debt trading were regulated banks. Now with Dodd Frank and increased capital regulations under Basel III and so on, most banks have completely given up on proprietary trading and have sold significant amounts of assets from their balance sheets to hedge funds, asset managers and other corporations. So huge amounts of debt has moved from regulated banks to the shadow banking market in the US, Europe and Asia. Economists have different opinions whether this is good or not good. The advantage is that if it with a bank, it is more transparent, we think we can control it better, the downside is what we have seen in 2008 is that if they are wrongly priced and you end up with huge losses, it may bring entire banks and ultimately the financial system to a collapse. Whereas if those positions are with hedge funds and asset managers, people assume that it's mainly investors that loose their money and not entire banks are at risk. But it has become less transparent. So to give you a random example. Let's assume Goldman used to trade significantly in student loans, having say $20bn of student loans on their books prior to 2008/2009. Now they sold off those positions to a hedge fund who continues the exact same business which Goldman has shut down. Personally I'm not sure whether the position is better sitting in a portfolio at a hedge fund or asset manager vs a bank like Goldman - that's what I'm saying.

To go back to the China debate. So you seem to think the shadow banking market is much larger than the amounts published, personally I don't know. But what I'm saying is you won't make the Chinese financial system more stable by moving those debt positions from the shadow banking market to the regulated banks. Which is ultimately exactly the opposite of what was done in the rest of the world since 2008. In China the main reason for the shadow banking market is that it is very hard for smaller corporations to obtain loans, so they go through other corporations/asset managers etc who extend them loans. Now is that a bad thing? Not sure, I think the main concern is that we lack transparency, not the fact that non-regulated entities extend loans.

the part about your debt/GDP calculations I couldn't follow. Can you help me understand why you add debt to GDP? Usually total debt is measured against the GDP of a country as ratio. But debt or an annual increase in debt is not added to GDP calculations - these are completely different types of measures. Or did I misunderstand your point?

So you seem to think the shadow banking market is much larger than the amounts published, personally I don't know.

You say that in that way in every post so there is a great deal you personally don't know.

Moreover, I am quoting published figures from authoritative sources.

The sources have different data, amounts, sums.

I accept the figures and the range of the figures that come from the various authoritative sources.

FSB says shadow banking in the PRC is $3 Trillion. The Chinese Academy of Social Sciences in Beijing says it is $6.54 Trillion. You need to show me where when and how I said or suggested the amounts are "much larger than the amounts published."

I have been dismissing your posts because they have from the outset been disingenuous, chatty, argumentative.

Edited January 13, 2015 by Publicus

[Robert24]

@Publicus: in your previous post you were trying to argue that shadow banking exposure is 140% of GDP and now you are saying you are only quoting FSB figure of 3 trillion (= about 30% of GDP) or Chinese Academy of Social Sciences of $6.5 trillion (= about 65% of GDP). What is your stance now and why did you add the 40% debt/GDP ratio to the 100% GDP? I didn't understand that.

So can you explain me again why you think a shadow banking market is bad per se? And why you think it's bad in China and not in the rest of the world outside China? Also could you respond to the previous topic I've responded to where you claim China has big demographic issue? Appreciate any response with arguments rather than calling my posts argumentative, disingenuous or chatty.

Also can you explain why the chinese stock market recently rallied nearly 50% over the last 9 months when you at the same time claim the property market bubble burst last March? There seems to be some disconnect in my opinion.

[Publicus]

@Publicus: in your previous post you were trying to argue that shadow banking exposure is 140% of GDP and now you are saying you are only quoting FSB figure of 3 trillion (= about 30% of GDP) or Chinese Academy of Social Sciences of $6.5 trillion (= about 65% of GDP). What is your stance now and why did you add the 40% debt/GDP ratio to the 100% GDP? I didn't understand that.

So can you explain me again why you think a shadow banking market is bad per se? And why you think it's bad in China and not in the rest of the world outside China? Also could you respond to the previous topic I've responded to where you claim China has big demographic issue? Appreciate any response with arguments rather than calling my posts argumentative, disingenuous or chatty.

Also can you explain why the chinese stock market recently rallied nearly 50% over the last 9 months when you at the same time claim the property market bubble burst last March? There seems to be some disconnect in my opinion.

Laughably dense.

I said different authoritative sources have differing data, figures, numbers, amounts, sums about PRC shadow banking.

I say again in a post to this thread, and for the umpteenth time, shadow banking in the PRC is off the books. It is not included in GDP reports.

BNP Paribas, UBS, BoA and others -- the global banking sector -- seem to have a consensus that unreported shadow banking is equal to 40% of total GDP.

The Financial Stability Board in London says PRC shadow banking, which is off the books and not calculated or reported in GDP, amounts to $3 Trillion....beyond what is reported as China's GDP.

The Chinese Academy of Social Sciences in Beijing says the USD value of the shadow banking sector of the PRC is in fact $6.54 Trillion. (Shadow banking in the PRC is off the books and not included as a part of GDP calculations or public reports.)

A reasonable person can get the picture. You can not.

As to your demographic denials, here is the present situation in a nutshell.....

Chinese GDP growth faces rising challenges that include the slowdown and eventual contraction of its labour force, a complication of which is its rising sex ratio at birth. The undesirable consequences of the resulting gender imbalance include excessive savings as families with boys compete to match their sons with scarce girls, trafficking in women, and rising disaffection and crime amongst the low-skill unmarried male population.

http://www.thechinastory.org/chinas-gender-imbalance-and-its-economic-performance/

The ratio of 120 boy births to 100 girl births is already causing problems. And while women outlive men, female baby mortality is very high in the PRChina further skewing the data away from the number of females in the population..

As to your third paragraph......

The equity markets in the PRC are fast rising because that is where people are currently putting money. Property and housing are too expensive, banks don't pay enough on savings, the state banking and the shadow banking markets are bone dry, people are spending on other goods and services with reservation and a high selectivity. Betting on equities by day, betting on cock fights by night.....in a nutshell.

I'm going to the index and to some other threads now thx. In the meantime, why don't you pick up a decent news report or two to learn something before I start to charge you for my time and energy.

[boomerangutang]

All that said, China and the Chinese are pretty resourceful folks and very, very few are more than a generation from some very real hardship. The people of China with weather the storm, but I am not so sure the gov't will have it quite so easy.

Well stated. I did some honing up on parts of Chinese history recently (for an e-book I wrote about HK). The 20the century was particularly rough for China. More Chinese died from the policies put forth by Mao, than from any other tyrannical leader of that century, including Hitler, Stalin and Hirohito. They had massive famines, civil war, war with other Asian countries (Japan twice), self-afflictions of the Cultural Revolution, the list goes on....

I don't wish any recurrent misery for modern-day Chinese, but I wish they'd find a way to be content within the borders of their own country. Instead, they're occupying Tibet, got missiles trained on Taiwan, are coveting all of the S.China Sea, and even giving the Indians headaches with border disputes.

Perhaps a financial crisis will enable them to sit back and think about their situation in a more realistic way, and slow down on their land-grabs. Then there's the multi-faceted issue with Chinese continuing to lust after endangered species. Less buying power, may slow that down also.

[F430murci]

Lol, these threads always end up focusing on US shortcomings. China will be fine. They can implode short term, but they will still be fine long term. Big economies will make it out of their failures. The problem is it always hurts the little guy or the middle class.

US is smart enough to realize if China fails, US has some skin in the game. Accordingly, all of the countries work together when necessary. China owes us a huge one as we bailed them out of huge losses related to CMOs through government guarantees to a huge expense to the US economy. I always thought we should have let GM, GM and FM fail and let China and others looking for unrealistic returns in risky investments to eat their losses. US, however, is so worried about being everyone's friend we eat shhyyttee constantly to help others.

Edited January 13, 2015 by F430murci

[MrWorldwide]

i still cant see how China failing is a 'win' for the US - was it really such a blow to american egos when a country that was a basketcase in 1970 briefly rose to become the world's largest economy ? Not A single mention of the role of Wall St greed in the decline of the US. Their attitude hasnt changed and they will continue to use the good times to rape the rest of the world, China or no.

[F430murci]

i still cant see how China failing is a 'win' for the US - was it really such a blow to american egos when a country that was a basketcase in 1970 briefly rose to become the world's largest economy ? Not A single mention of the role of Wall St greed in the decline of the US. Their attitude hasnt changed and they will continue to use the good times to rape the rest of the world, China or no.

I don't think anyone in the US, especially with a securities background or that is an investor, wants to see China fail. There is really no animosity with China. This is internet folklore that loser keyboard warriors with not better to do try and pit this US v. China death match bs.

That said, China has huge problems, perhaps worse than US ever had. US had private banks that government bailed out through TARP in 2008. China has government owned banks so they really don't need something as strange as TARP. Again, the net effect is that middle class and property developers will take a huge licking here.

I would tend to believe that US would step in and assist China if a huge bubble was about take their economy down. We are complete suckers for that stuff and I don't think we have animosity toward China like some wish to portray here.

[MrWorldwide]

Thanks for that, F430Murci - I guess I've become so accustomed to the kneejerk, emotional reactions of many here that I dont always hear the voices of reason. Absolutely no argument that China has a host of potential problems, but the last thing I want to see is an unstable government trying to control 2 billion people who see their newfound 'prosperity' being flushed down the toilet.

[F430murci]

Thanks for that, F430Murci - I guess I've become so accustomed to the kneejerk, emotional reactions of many here that I dont always hear the voices of reason. Absolutely no argument that China has a host of potential problems, but the last thing I want to see is an unstable government trying to control 2 billion people who see their newfound 'prosperity' being flushed down the toilet.

Not directed toward you. Some, however, seem to do nothing but forecast failure of US or China. Both are nutty because neither will happen. Both are good countries with positive attributes. Both are also too big to fail.

I mean seriously, what do some of you guys think? China, US or Russia will just go down in flames and cease to exist????? You think one of these countries will fail and of all suddenly become under the control of another country??? That is your two options lol.

Russia is definitely screwed. That does not mean they are going to completely fail and cease to exist or become an American territory.

Edited January 13, 2015 by F430murci

[Thai at Heart]

Just look today at the uk.

All this stimulus, o.5% inflation. All that's left is for the govt to spend spend spend.

Houses are maxed out, consumers are maxed out, govt is maxed out.

No one has any more money to spend. Sit tight.

Its gonna be a hell of a ride.

[NeverSure]

-snip-

Russia is definitely screwed. That does not mean they are going to completely fail and cease to exist or become an American territory.

The USSR completely failed and ceased to exist. Some of those countries aligned with the West. The Ukraine is unpredictable today as to whether it will fall into a complete revolution.

Russia only recently has looked prosperous due to oil discoveries. Now that is letting them down.

Both China and Russia are communist and responsible to feed and house their people. Russia has had its ups and downs and right now is down.

China has 1.3 billion mouths to feed. It is a net importer of food. It's impossible to get an accurate figure for what China's GDP is, but even if known it has to be divided by 4 to get a comparison with the US for GDP per capita.

I think it's sort sighted to think China can't fail if fail means what's happening to Russia. Russia is already in the mire.

When the US took the hard hit at least it could feed its people and it had the inventions, natural resources and technology that were driving the world into the new century. That private sector including farm land and natural resources is what has put the US economy back into overdrive. That and capitalism.

China has no such thing.

[Publicus]

Thanks for that, F430Murci - I guess I've become so accustomed to the kneejerk, emotional reactions of many here that I dont always hear the voices of reason. Absolutely no argument that China has a host of potential problems, but the last thing I want to see is an unstable government trying to control 2 billion people who see their newfound 'prosperity' being flushed down the toilet.

the last thing I want to see is an unstable government trying to control 2 billion people who see their newfound 'prosperity' being flushed down the toilet.

Indeed, the PRChinese people will not be protesting or demonstrating for clean air, land, water, as important as those things are and which is now permitted by the CCP because it's become so common throughout the land.

This is about money. It's about your house, it's about your job, your family and food on the table...it's about your life.

I'll say if there's a run on the banks rather than say when there might be a run, the Boyz in Beijing will send out their paramilitary People's Armed Police. The CCP's internal security forces get more money each year than the whole of the PRC military get....each year. The extraordinary 800,000 PAP exist in 46 divisions assigned to every province of China.

I am one who believes absolutely the Boyz have always anticipated another Tiananmen Square political crisis or a severe money crisis was very likely sooner or later. One or the other or perhaps both.

[F430murci]

-snip-

Russia is definitely screwed. That does not mean they are going to completely fail and cease to exist or become an American territory.

The USSR completely failed and ceased to exist. Some of those countries aligned with the West. The Ukraine is unpredictable today as to whether it will fall into a complete revolution.

Russia only recently has looked prosperous due to oil discoveries. Now that is letting them down.

Both China and Russia are communist and responsible to feed and house their people. Russia has had its ups and downs and right now is down.

China has 1.3 billion mouths to feed. It is a net importer of food. It's impossible to get an accurate figure for what China's GDP is, but even if known it has to be divided by 4 to get a comparison with the US for GDP per capita.

I think it's sort sighted to think China can't fail if fail means what's happening to Russia. Russia is already in the mire.

When the US took the hard hit at least it could feed its people and it had the inventions, natural resources and technology that were driving the world into the new century. That private sector including farm land and natural resources is what has put the US economy back into overdrive. That and capitalism.

China has no such thing.

Hey buddy, what does fail mean. Such an ambiguous term. We pretty much failed in 2008, but we loaned money to bring reserves back in line.

When I speak of fail, I mean they go belly up, totally broke, no options and cease to exist. That is not going to happen to any super power.

Question of semantics at this point. For sure Russia has failed. China is failing. Nevertheless, I think both countries will bounce back like we did in 2011.

Edited January 13, 2015 by F430murci

[MrWorldwide]

Failure doesnt have to mean complete devastation and a return to China pre-1990 : how many of us remember when countries like Brazil and India were being tipped as the 'next big thing' on the global stage ? Western observers were so transfixed by double-digit growth rates after the GFC that they seem to have ignored the problems each of these countries faced.

http://www.bbc.com/news/business-29960335

The big difference between the other 'BRICS' countries and China - IMO - is military spending. China is second only to the US in it's overall budget, maintains a massive (and presumably expensive) defence force and has pumped billions into trying to find allies in our region : interesting times ahead if there is a major contraction in their economy accompanied by political instability.

http://en.wikipedia.org/wiki/Military_budget_of_the_People's_Republic_of_China

[NeverSure]

The USSR completely failed and ceased to exist. Some of those countries aligned with the West. The Ukraine is unpredictable today as to whether it will fall into a complete revolution.

Russia only recently has looked prosperous due to oil discoveries. Now that is letting them down.

Both China and Russia are communist and responsible to feed and house their people. Russia has had its ups and downs and right now is down.

China has 1.3 billion mouths to feed. It is a net importer of food. It's impossible to get an accurate figure for what China's GDP is, but even if known it has to be divided by 4 to get a comparison with the US for GDP per capita.

I think it's sort sighted to think China can't fail if fail means what's happening to Russia. Russia is already in the mire.

When the US took the hard hit at least it could feed its people and it had the inventions, natural resources and technology that were driving the world into the new century. That private sector including farm land and natural resources is what has put the US economy back into overdrive. That and capitalism.

China has no such thing.

Hey buddy, what does fail mean. Such an ambiguous term. We pretty much failed in 2008, but we loaned money to bring reserves back in line.

When I speak of fail, I mean they go belly up, totally broke, no options and cease to exist. That is not going to happen to any super power.

Question of semantics at this point. For sure Russia has failed. China is failing. Nevertheless, I think both countries will bounce back like we did in 2011.

The US didn't fail the way Russia has. What does Russia have for an economic engine?

In the US the big tech companies didn't fail, and there are lots of them from Microsoft and other software providers to Intel and other hardware providers. ISP's and trunklines didn't fail. Farmers didn't fail. In fact beef and corn prices went up. I grew up on a large beef and cattle ranch and that ranch made more money during the "crash" than it ever had.

The difference between the US, and Russia and China is diversity and innovation. Russia and China have all of their eggs in one basket and when that goes down it all goes down.

Not to go off topic, but it's easier to see by looking at Thailand because its smaller. Still, it lacks innovation and technology and like China, it picks up the scraps from what others invented and learned to manufacture, it picks up the scraps of others' spending money in tourism, it grows low value crops due to the type of land it has and the climate... Thailand can grow its own food and that's the one advantage it has over China and Russia. But there are more similarities than differences.

With all the above plus the natural resources including massive amounts of good farmland that the US has, it can't be compared to China or Russia in the ability to bounce back.

The US is bouncing back strongly because of its resources and its business model. Russia and China have no such thing. Neither does any of Europe or Asia and its showing.

I agree that China and Russia won't actually cease to exist. They could very conceivably cease to exist as world powers just as the USSR did. I actually question whether they are such world powers today.

Edited January 14, 2015 by NeverSure