# China Bears



## Mr Z (14 October 2011)

I thought I might just see what peoples thoughts on China are. We are seeing a range of China Bear articles, some with good observations, but then we seem to do this regularly and China chugs on. Feel free to comment!


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## Gringotts Bank (14 October 2011)

Many years ago, Soros predicted China would be strong until 2015.  So I'm happy to go along with that for the moment, unless anyone knows of a more recent comment made by him??

Near term bullish, long term bearish for me.


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## Mr Z (14 October 2011)

*The one child policy...*

...is being touted as a demographic wall which will slow China, aging population and all that. Some say it is due to hit in six years or so, maybe that informs Soro's idea. The year that it becomes important seems to be a little rubbery due to that fact that the policy has not been strictly implemented. No one is really sure when it starts to become an issue.




*China’s Population: A Looming Demographic Time Bomb*

*George Shultz, Former US Secretary of State - On China*


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## wayneL (14 October 2011)

I wouldn't like to put "terms" on it (given up on that  ), but surely there has to be a hiccup or two along the way, even if the long term view is bullish?


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## Mr Z (14 October 2011)

Yes, you would think so wouldn't you. At the least a decent recession of some sort.


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## disarray (14 October 2011)

don't discount the likelihood of war. china is becoming increasingly aggressive, and it engages in endless acts of espionage and an undeclared but highly active cyber war against EVERYONE. they may just piss someone off enough to get slapped hard for it, we all saw how amazing stuxnet was.

then theres conventional military flashpoints like the south china sea and taiwan. even if the war between the US and china stays cold, it could still bury china like it did the soviet union.

then there's all sorts of internal pressures mounting in china. there are endless riots going on in regional cities which are unreported due to media blackouts, and hundreds of millions of peasants looking to upgrade their quality of life which the world probably can't afford. there's endemic corruption, severe environmental degradation and dependence upon external energy and resource sources which can be easily disrupted.

from an isolated and purely economic point of view i'm short term bear, long term bull, but the world doesn't work like that and i think the likelihood of conflict between china and the west, or even china vs itself, is quite high.


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## Mr Z (14 October 2011)

I would think that an economic event would come first, these things tend to flow that way. Booms bust then comes trade war then comes a hot war. The trade angst seems to be hotting with the US. Anyway, yes a real possible in the longer run but to me it doesn't feel like we are close yet.


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## disarray (14 October 2011)

Mr Z said:


> Booms bust then comes trade war then comes a hot war. The trade angst seems to be hotting with the US.




funny you should mention that



> BEIJING, Oct. 13 (Xinhuanet) -- Arguing that the RMB yuan's exchange rate is not the cause of China- U.S. trade imbalance, China expressed its strong oppositions hours after the U.S. Senate passed a controversial bill that would slap tariffs on Chinese goods for the so-called "currency manipulation", warning the U.S. politicians against politicizing the issue of China's currency and resorting to trade protectionism.
> 
> In a written statement posted on its website, China's Foreign Ministry urged rejection of the bill.
> 
> ...


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## Gringotts Bank (14 October 2011)

disarray said:


> don't discount the likelihood of war. china is becoming increasingly aggressive, and it engages in endless acts of espionage and an undeclared but highly active cyber war against EVERYONE. they may just piss someone off enough to get slapped hard for it, we all saw how amazing stuxnet was.
> 
> then theres conventional military flashpoints like the south china sea and taiwan. even if the war between the US and china stays cold, it could still bury china like it did the soviet union.
> 
> ...




The truth has been kept from the peasants for as long time.  The truth being that the incredible wealth enjoyed by the upper and upper-middle classes has come largely through exploitation of the uneducated lower classes.  American corporations are largely to blame for showing the locals how to run sweatshops and generate huge profits this way.

I'm assuming the 'authorities' would want to be pro-active and start looking after the uneducated masses before they learn to read and use a computer.  Implementing changes such as award wages, work injury insurance, paid leave, health care and so on should be high on their list you'd imagine.  Otherwise, civil unrest.  The government's mantra "everyone CAN be rich" is bull****.  It's a lie they tell the workers to keep them working hard.


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## Mr Z (14 October 2011)

*China: Continued Boom or Bursting Bubble?*


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## notting (14 October 2011)

China is a bully and a coward.
They will only make war when they know they have overwhelming power that others are powerless against. Once they have a nation they use the population as slaves and flood them out with their own people they are terrifyingly brutal and cruel to the people of the nations they occupy.
China attacks and occupies small nations around them who can do nothing against them. They choose times when the West is tied up with bigger matters like Vietnam etc.
A hot war is unlikely with China as they know they do not have the power *yet*.
Don't discount their covert armies all over the world that we regard as students and immigrants.  Not to mention North Korea.
If any one saw ABCs story on the Chinese sex slave syndicates it gives you an idea of what is *normal for powerful Chinese*.  We see this as unthinkable, horrific and extreme.  For them it's busness!! They have not sense of human rights.
http://www.smh.com.au/national/legal-brothels-linked-to-international-sex-trafficking-rings-20111009-1lfxs.html

Given all that it's hard to see how China can ultimately succeed in the long run.  It runs against human nature which prospers in free, peaceful and democratic environments.


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## Knobby22 (14 October 2011)

*Re: China Pandas*

Everyone knows the Chinese bear is a Panda. So the heading should be changed:


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## Starcraftmazter (16 October 2011)

Too many economic problems, too much of a housing bubble. The question is, how long can they keep it going for.


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## choofer (17 October 2011)

All over red rover. China will not hold out against the next GFC2. Welcome to The Muther Lode Depression. Should last a good 10 years. Something to look forward to dudes.


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## Glen48 (17 October 2011)

Saw a report were they estimate there are 55 million empty units and still building, one expert went around during a eclipse looking for  office lights and there weren't many on, the local government's are using black market   money to expand and no Mayor wants to report  Chairman Who Flung Dung  he is deep in debt.  
 So the reals story sounds as bad or worse than USA RE market which is still falling.
 When USA  RE gets to buy one take one its time to get out the bullets and beans.


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## Mr Z (17 October 2011)

Starcraftmazter said:


> too much of a housing bubble.




The housing situation is odd, I am not sure I'd call it a bubble, but I'm not sure what it is!? 60% of houses are bought with cash and the ownership of second and third places is limited by restrictive financing options. Yet on the build out side the production seems very optimistic. It is just nothing like what the US has seen and what exists here in Australia. The Chinese still have many options to shore up housing on the demand side of the equation... but will they and will it work? ---> It is not your garden variety bubble if it is one!


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## Mr Z (17 October 2011)

Glen48 said:


> Saw a report were they estimate there are 55 million empty units and still building, one expert went around during a eclipse looking for  office lights and there weren't many on, the local government's are using black market   money to expand and no Mayor wants to report  Chairman Who Flung Dung  he is deep in debt.
> So the reals story sounds as bad or worse than USA RE market which is still falling.
> When USA  RE gets to buy one take one its time to get out the bullets and beans.




But you see the difference? It is credit driven over supply against choked back demand. Not your typical bubble dynamic, in fact it strikes me that this imbalance will resolve much faster than a US style bubble.


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## Starcraftmazter (17 October 2011)

Mr Z said:


> The housing situation is odd, I am not sure I'd call it a bubble, but I'm not sure what it is!? 60% of houses are bought with cash and the ownership of second and third places is limited by restrictive financing options. Yet on the build out side the production seems very optimistic. It is just nothing like what the US has seen and what exists here in Australia. The Chinese still have many options to shore up housing demand side of the equation... but will they and will it work? ---> It is not your garden variety bubble if it is one!




Call it a malinvestment if you will, it is probably the most accurate term.

The apartments constructed are not adequate to meet demand, as they are too expensive. A lot of buildings constructed are of poor quality and fall apart quickly.

Housing is used as a store of wealth in China, as there are no alternative inflation beating investments. People speculate on property, believing it can only go up. That is in my view the very definition of a bubble.


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## Mr Z (17 October 2011)

Starcraftmazter said:


> Call it a malinvestment if you will, it is probably the most accurate term.
> 
> The apartments constructed are not adequate to meet demand, as they are too expensive. A lot of buildings constructed are of poor quality and fall apart quickly.
> 
> Housing is used as a store of wealth in China, as there are no alternative inflation beating investments. People speculate on property, believing it can only go up. That is in my view the very definition of a bubble.




Perhaps malinvestment but China certainly has the population to use them.

If 60% are paid for in Cash and financing is restricted it is hard to argue that they are too expensive given western norms.

I would not comment on quality until I had seen them, US commentators seem to love running down Chinese capability. I'm sure they are rough and ready but I think falling apart is probably a stretch, the Chinese are not stupid.

Leveraged supply meets leveraged demand with speculative activity on both sides of the equation = bubble. This is not what you call a classic bubble.


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## disarray (17 October 2011)

Mr Z said:


> I would not comment on quality until I had seen them, US commentators seem to love running down Chinese capability. I'm sure they are rough and ready but I think falling apart is probably a stretch, the Chinese are not stupid.




no, but many are greedy and they don't have the regulation or procedures we do.


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## Mr Z (17 October 2011)

disarray said:


> no, but many are greedy and they don't have the regulation or procedures we do.




LOL... not a good look  That can't be good for a developers future prospects! 

There is a tower in St Kilda that looks like that should happen to it, not sure what happened but it is the dodgiest looking thing around.

http://www.flickr.com/photos/calignosus/3766283994/in/photostream

Yes that is around a meter or so of lean on it!


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## skc (17 October 2011)

disarray said:


> no, but many are greedy and they don't have the regulation or procedures we do.




I believe the developer here is using a recent innovation in construction technique called "tilt up" construction. It reduces the requirement for cranes.

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


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## Mr Z (17 October 2011)

In their defense the building itself held together despite the fall, so the construction was not THAT bad. Apparently it had something to do with the garage being constructed underneath it, maybe a good geotech was needed! Also it seems to be fairly isolated occurrences and it is not like first world nations are not without the odd construction disaster. + its China, they only lost two weeks work 

Tilt up... LOL. You know they could probably do that, it is amazing how they can transport brick buildings.


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## Glen48 (17 October 2011)

Flat pack housing what  will they think of next..Those units the builder decide no to   use piles as support  I guess he thought they  are hidden and no one would know.


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## Mr Z (17 October 2011)

You should see the Allen key that comes with it.


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## choofer (17 October 2011)

disarray said:


> no, but many are greedy and they don't have the regulation or procedures we do.




That is a very strange way to erect a building, they musty have one massive crane to pull it up lol


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## marioland (17 October 2011)

I think it is just a matter of time until China's economy will become bearish. Kiyosaki predicted that China would trigger the GFC and that didn't happen but they're still due to hit a rough patch.


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## Mr Z (17 October 2011)

Kiyosaki didn't really see the first GFC coming did he? The crowd I was reading seemed to be light years ahead of him, I'd not be trusting his calls FWIW. 

I'm sure China will stumble, no prize for forecasting that as it is par for the course in any countries economic development. When is the handy bit of info... Many are calling it a ponzi scheme with no sustainability, I'd question that idea but then some big names are short China, guys like Chanos. Dohman is a bear, although his arguments are not that well developed IMO. I'd like to read a really well developed bear case, most seem to be guessing quite a bit.


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## Starcraftmazter (18 October 2011)

Mr Z said:


> If 60% are paid for in Cash and financing is restricted it is hard to argue that they are too expensive given western norms.




Funny you should mention that. The land values on the most rural towns, where such land is covered by frost almost year sell for the same amounts of money as the most expensive land in the richest and best suburbs in the USA. It is a by all means a bubble.



Mr Z said:


> I would not comment on quality until I had seen them, US commentators seem to love running down Chinese capability. I'm sure they are rough and ready but I think falling apart is probably a stretch, the Chinese are not stupid.




They have a lot of collapsing bridges pretty much on a weekly basis. There is significant infrastructural overcapacity as well. A lot of infrastructure is needed to support a population of 1.2-1.4 Bn sure - but it can not simply be built randomly, far away from major population centres. And let's not even mention their ridiculous high speed rail systems which replace ordinary rail, are too expensive for ordinary people to use, and are built with shoddy quality.

I recommend you read these:
http://www.macrobusiness.com.au/2011/07/chinese-malinvestment-grows/
http://www.macrobusiness.com.au/2011/07/chinas-believe-it-or-not/

Very deep insights.


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## tothemax6 (18 October 2011)

I've been posting on 'China' threads for a while now, and most people just ignore me, but given that this thread seems to be specifically about the issue I often raise, I suppose I'll throw in my .

China is unambiguously in a construction bubble.
Any Google searches for 'china empty cities' will show you evidence of the bubble. There are masses of buildings that are just being built 'for investment', that 'will be needed in the future, regardless of how many are made', and which remain empty. Indeed, investors _prefer_ to keep the real estate empty - a used apartment lowers future resale price. Not only that, the real estate is wildly unaffordable to the average chinese. I've seen videos of a group of working chinese, including a married couple, all huddling in the one run down hovel on ground level, under the shadows of the empty condominiums that they couldn't possibly live in. 

And the real estate bubble is just the beginning. For a long time now, to meet growth targets (or perhaps as a sinister throwback, 'quotas'), governments in china have been building and building and building, _anything_. All public works add points to GDP. And how are these public works financed? Heavy duty credit expansion from the banks - the hallmark of true bubble. It is no surprise that inflation is consistently above 6% even by government measures. In spite of this, the central bank still has interest rates held at below the rate of inflation.

Indeed, if China does not crash, it will truly be a magic country, which defies all established understanding of economics. 

This is not to say that china will not do well in the long run (the US for instance, grew at a tremendous pace, regardless of the repeated financial panics and recessions throughout its history). But at some point in the near future, it _will_ crash.

As a country which is riding a mining boom, which comes from the Chinese desire to throw iron ore and coal into its construction boom, investors here should be paying more attention to this, and perhaps be thinking about how to protect their wealth.
I'm currently thinking yen, gold, USD in that order, to protect from the inevitable drop in AUD.


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## Mr Z (18 October 2011)

Starcraftmazter said:


> Funny you should mention that. The land values on the most rural towns, where such land is covered by frost almost year sell for the same amounts of money as the most expensive land in the richest and best suburbs in the USA. It is a by all means a bubble.




Can you source that for me? The last land value I saw for Shanghai put it on par with an upper middle class Melbourne suburb. It seems unlikely that essentially waste rural land (frost all year?) is selling for the same as Malibu Beach, even after the US crash! The last price I saw on units in a new Chinese city was around the 100K AUD mark, a price we could not build for!

Regardless a construction bubble where demand has been choked back is a far more resolvable situation than exists in the US or Australia.




Starcraftmazter said:


> They have a lot of collapsing bridges pretty much on a weekly basis. There is significant infrastructural overcapacity as well. A lot of infrastructure is needed to support a population of 1.2-1.4 Bn sure - but it can not simply be built randomly, far away from major population centres. And let's not even mention their ridiculous high speed rail systems which replace ordinary rail, are too expensive for ordinary people to use, and are built with shoddy quality.
> 
> I recommend you read these:
> http://www.macrobusiness.com.au/2011/07/chinese-malinvestment-grows/
> ...




I'm sorry but you just sound deeply bias, you seem to be attempting to degrade the Chinese and their decision making processes. While we may not get it one thing they are not is stupid. They have had all the lessons of US history to study and it will not surprise if there is some method in what the US commentators describe as madness.

There is certainly a lot of fixed investment going on, I'd rather that than their codependent partners (the US) 'no investment'. They will come off better after any economic train wreck because they will have a better base to build on. The train wreck part seems inevitable, my expectation has been that it will be a great depression event but that China will emerge with the upper hand, much like the US did over England. Chinese demographics don't support that idea that well, they suggest that we should be looking more toward India. India seems to be working smarter and not suffering from the aging population issue. Not so much production going on in India yet but they are getting well qualified. IMO this is the dark horse coming from behind, smart and aggressive if a little on the chaotic side.


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## Mr Z (18 October 2011)

tothemax6 said:


> I've been posting on 'China' threads for a while now, and most people just ignore me,




Doesn't surprise me as you specifically go out of your way to call people thugs. Not a great tactic if you want to be seen as credible.

Still looking for quality research on China, the stuff I have bought so far is questionable with bus size holes in their 'logical' deductions. Its either for or agin with a zeal I naturally distrust. The Chinese seem to pull out a lot of emotion in the investment community.


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## notting (18 October 2011)

Labour in the inner areas has become more expensive. A middle class has emerged in these areas that can just afford the units. They pay a fair bit of the capital up front which lessons the risk for banks. The plan is to replicate the 'glorious progress' in the outer areas where slave labour is cheaper. 
They have built units in anticipation of new manufacturing etc in the outer areas. Trouble is the inner areas manufacturing slows down due to work moving to outer areas.
The rulers and their princlings don't give a hoot. 
They made money on the inner boom and will make money replicating it on the outer boom, as the inner boom goes bust, it doesn't look much different on the grand scale. It's just being shuffled around whilst the rulers and princlings make the money selling units in thriving areas that go bust after it's all sold and they have fleeced their people.
Lovely.


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## Starcraftmazter (18 October 2011)

Mr Z said:


> Can you source that for me? The last land value I saw for Shanghai put it on par with an upper middle class Melbourne suburb. It seems unlikely that essentially waste rural land (frost all year?) is selling for the same as Malibu Beach, even after the US crash! The last price I saw on units in a new Chinese city was around the 100K AUD mark, a price we could not build for!




This is one of said articles, however it is hard to find them as they are from months away:
http://www.macrobusiness.com.au/2011/06/chinas-property-bubble-spreading/




Mr Z said:


> Regardless a construction bubble where demand has been choked back is a far more resolvable situation than exists in the US or Australia.




Well every bubble is different, it has a unique nature to it. But that doesn't make it any less of a bubble.




Mr Z said:


> I'm sorry but you just sound deeply bias, you seem to be attempting to degrade the Chinese and their decision making processes. While we may not get it one thing they are not is stupid. They have had all the lessons of US history to study and it will not surprise if there is some method in what the US commentators describe as madness.




Biased how? All I am doing is providing analysis of the situation. Pardon me if I prefer to rely on that rather than hope.

Chinese have a very inefficient and ineffective economy. In an ideal economy decisions are made by the free market. In China, any semblance of a "free market" is deeply perverted by the government.

The blog I linked is not a US blog, the commentators there are Australian (most of the rest of which seem all too happy to get on their knees for China).



Mr Z said:


> There is certainly a lot of fixed investment going on, I'd rather that than their codependent partners (the US) 'no investment'.




A lot is an understatement - most of their GDP growth is fixed investment. If you ask me, no investment is better than malinvestment. I don't see how much of anything being constructed in China contributes to their economy. They may as well be building statues and it would be all the same. This is a flawed measure of growth or economic strength.


And whist this may sound pessimistic, this is but the tip of the iceberg of all the problems which China has.


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## Mr Z (18 October 2011)

Starcraftmazter said:


> This is one of said articles, however it is hard to find them as they are from months away:
> http://www.macrobusiness.com.au/2011/06/chinas-property-bubble-spreading/
> 
> Well every bubble is different, it has a unique nature to it. But that doesn't make it any less of a bubble.




Well yeah it kinda does, recovering from over supply where demand is not leveraged to the hilt is a lot less of a bubble than recovering from over supply and credit pumped demand. One of the articles you referenced suggested that this 'bubble' has residential property overvalued by 20 to 30%. That is not a bubble, that is an over valued market. IMO 20 to 30% over value would be a relatively normal up cycle in property that can be resolved without a crash. I would expect corrections in the order of 50% if this is a proper 'bubble' in all respects. Bubble is an over used term, especially when it comes to things like oil. It seems if we don't agree with it then it must be a bubble, I don't see it that simply.



Starcraftmazter said:


> Biased how? All I am doing is providing analysis of the situation. Pardon me if I prefer to rely on that rather than hope.




Yes and it appeared more emotional than deductive. Pardon me if I want to cut past emotion and look for fact.



Starcraftmazter said:


> Chinese have a very inefficient and ineffective economy. In an ideal economy decisions are made by the free market. In China, any semblance of a "free market" is deeply perverted by the government.




We don't have a free market anywhere in the world today, government are twisting the fates of all of the largest economies, they are all deeply perverted in one way or another. Our job is to understand the relative merits not the absolute position of any given player. I can tear down all of the major economies with fundamentally based critiques, failures are inevitable but confusing inevitable with imminent is a major mistake. Take the muni market in the US, it is destine to turn the US into a reasonable facsimile of the Eurozone, perhaps this will be next years disaster but for now its not the issue. One could argue that the US is a ponzi scheme built on ever increasing and unsustainable debt, but that has been the case for most of my life and you could have argued the that case for close to 50 years. They where always going to wreck but when and how was the key. China is also going to wreck but how far can they get? Is inevitable being confused with imminent?



Starcraftmazter said:


> The blog I linked is not a US blog, the commentators there are Australian (most of the rest of which seem all too happy to get on their knees for China).




I always wonder how many of the bloggers actually get to China, meet the people and dig into the real situation. This is one of the complaints of one of the writers I read, many China bears have never even been there to have a good look. However he is a bit of a bias bull  



Starcraftmazter said:


> A lot is an understatement - most of their GDP growth is fixed investment. If you ask me, no investment is better than malinvestment. I don't see how much of anything being constructed in China contributes to their economy. They may as well be building statues and it would be all the same. This is a flawed measure of growth or economic strength.




According to some all of their GDP growth is inflation, who to believe! According to my numbers 50% of Chinese GDP is fixed investment and given that it has been a rapidly growing country from a low infrastructure base that doesn't look all that bad against a developed world norm that has tapered from 30% to 20% over the last four decades or so. Across the same period China has trended from 30% to 50% but then look at the growth that they have had to accommodate with infrastructure. 

With all due respect, we have China over investing and the US under investing both heading for a wreck. After the wreck China will still have the investment, which if you are going to wreck anyway is a better way to go. At least China will have something for the pain, the US on the other hand?! That goes for the factory overbuild and all the other industrial follies that have been pointed out, in the end they  will still own the capacity where as the US has been gutted. Much like the US's rise to prominence IMO, well so far... that kinda assumes that China makes it to the top. The demographics are the strongest argument against that IMO.



Starcraftmazter said:


> And whist this may sound pessimistic, this is but the tip of the iceberg of all the problems which China has.




Yes, possibly quite true but we are in a field of icebergs and this is about relative threat levels. Look at the USD rally, it is difficult to build a case for that if you solely look at the US! Yet there it is... IMO this will continue with the focus continually shifting to the worst looking horse in the glue factory... currently Europe, next year maybe a US muni wreck? Or will China's issues become front page? Maybe these issues finally coincide and Chinas weaknesses become a big problem, especially for us in Oz. Personally I am thinking that 2013 is a danger year but that idea is based more on subjective reasoning, I'd love to get a better handle on it.


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## notting (18 October 2011)

A bearish opinion
http://www.reuters.com/article/2011/06/13/us-roubini-idUSTRE75C1OF20110613


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## Mr Z (18 October 2011)

2013... there is that number!


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## Glen48 (18 October 2011)

Could be worse if you live in USA:
Mac Slavo
October 15th, 2011
SHTFplan.com
Comments (315)



In the past, when Americans compared their standard of living to that of their Chinese counterparts our well being was hands down better off than those living under the Communist regime. A recent Gallup survey, however, shows some thing has changed over the last three years.



Gallup surveys in China and the U.S. reveal Chinese are struggling less than Americans to put food on their tables. Six percent of Chinese in 2011 say there have been times in the past 12 months when they did not have enough money to buy food that they or their family needed, down significantly from 16% in 2008. Over the same period, the percentage of Americans saying they did not have money for food in the previous 12 months more than doubled from 9% in 2008 to 19% in 2011.

…

Fewer Americans had access to basic life necessities in September. The nation’s Basic Access Index score fell to 81.4 last month ”” on par with the 81.5 measured in February and March 2009 amid the recession.

Americans’ access to basic necessities has never fully recovered after declining amid the 2008 to 2009 financial crisis and has declined further since February of this year.

…

These findings are based on more than 29,000 interviews conducted each month from January 2008 through September 2011 with American adults as a part of the Gallup-Healthways Well-Being Index.

…

While the recession officially ended more than two years ago, the effects on Americans continue to linger.

Unemployment remains high and more Americans than ever are living in poverty, which may lead to more people struggling to access basic life necessities such as healthcare, food, and shelter.

Although the vast majority of Americans still report that they are not having trouble accessing basic necessities, the trend is currently going in the wrong direction. Additionally Gallup’s global research finds Americans are now struggling more than Chinese to afford food, a reversal from 2008. If the worries about a double-dip recession come to fruition, even more Americans may start having problems meeting their basic needs.

Source: Gallup: Americans, Chinese

While economists, analysts and television pundits argue about the severity of the recession or a double dip in the recovery, it’s obvious that Main Street is experiencing depression-like economic symptoms. The key data points, the ones that really matter to the average person on the ground, show that more Americans than ever before are on food stamps, millions are losing their homes, purchasing power is dropping, and unemployment is out of control.

A lack of access to basic life necessities is also rearing its head in the form of rising crime. Cities across the country have reported large-scale garden vegetable thefts, and weekly news reports show that theft of metal – especially copper – is on the rise as people struggle to get by.

All of this comes at a time when leaders in Washington say that the country is experiencing economic growth, albeit sluggishly, and that more spending in the form of stimulus is needed to prevent further degradation. Based on recent comments by those holding top positions in the public and private sectors there is a serious possibility that the economic crisis will revert to something worse than what we have experienced since 2008 – something even worse than the Great Depression.

Given that Gallup’s survey suggests around 60 million Americans don’t have money to feed themselves or their families, we can only imagine what the coming food crisis in America will look like amid a significantly deteriorating economic situation.

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Author: Mac Slavo
Date: October 15th, 2011
Website: www.SHTFplan.com
Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.


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## Glen48 (18 October 2011)

James Quinn, Casey Research


In thirty short years, China's  GDP from $216 billion to $6 trillion. Reserve capital of $3 trillion. She reversed America’s fortunes from the greatest creditor nation to the greatest debtor nation. She gutted America’s factories while creating the world’s largest manufacturing base in her own country. A measure of output that highly correlates to GDP is energy consumption. In June of this year, 2011, China surpassed the United States as the largest consumer of energy on the planet. While the US consumes 19% of the world’s energy, China consumes 20.3%.

china's GDP 2,800%, the US GDP grew from $2.3 trillion to $15 trillion – a mere 650% increase, of which 420% was due to inflation.  The question is whether that growth is sustainable

Ihe  stimulus package in November 2008 totaled $586 billion and was to be invested in key areas such as housing, rural infrastructure, transportation, health and education, environment, industry, disaster rebuilding, income building, tax cuts, and finance. In reality, the central government pumped an additional $1.5 trillion into the economy in an effort to maintain social stability through the subsidization of its industrial base. Chinese banks funneled cheap loans to state-owned enterprises in order to manufacture artificial profit margins to keep Chinese goods competitive and employment maximized. In the short term, the stimulus produced the desired effect.

Specifically, the Shanghai Index – which had topped out at 5,913 in October of 2007 and had fallen to a low of 1,678 by November 2008 – responded to the stimulus by rebounding to 3,300 in January 2010, as the chart below shows.

As with all monetary and fiscal stimuli, however, the initial high is always followed by a hangover. Today the Shanghai Index stands at 2,350, down 29% from when I penned my article. China is also experiencing accelerating inflation, *a real estate bubble of epic proportions,* a looming banking crisis due to the *billions in bad loans made by Chinese banks as commanded by the Chinese government, and growing social unrest due to rising food and energy prices.*



There are few opinions in the middle regarding the China story. People are either convinced China is a juggernaut that can’t be stopped and will become the dominant world power (a recent, global Pew Poll found that 47% of respondents think China is or will be the dominant global power), or they see a colossal bubble that will burst and cause worldwide mayhem. While some might think my world-view has a negative slant, I tend toward what I think is healthy skepticism that causes me to view things in a more realistic manner.

Based on the facts as I understand them, the Chinese government has created a commercial and residential real estate bubble in an effort to keep peasants employed and not rioting in the streets. In the case of the US subprime mortgage bubble, critical thinkers like Steve Eisman and Michael Burry figured out it was a bubble three years before it burst. Jim Chanos and Andy Xei have been warning about this Chinese bubble for over a year. They have been scorned by the same Wall Street shills who denied the US housing bubble. As Eisman and Burry proved (reaping billions), just because you are early doesn’t mean you are wrong.

Inflated Dreams

The table below paints a troublesome picture of rising inflation and gigantic over-investment in real estate. And this takes into account the fact that, much like the Bureau of Labor Statistics (BLS) here in the US massages data, the Chinese statistics are tortured by the Party to paint the best possible picture. Even still, the Chinese government’s own numbers show inflation escalating as economic growth is slowing.



And the trend is not improving: The latest data show year-over-year inflation surging by 6.4% in June and food prices skyrocketing by 14%. With annual disposable income of less than $2,500 in urban areas and just $600 in rural areas, food and energy account for a huge percentage of the average Chinese person’s daily living expenses. The Chinese authorities are terrified by the revolutions sweeping across the Middle East and are desperate to put out the inflationary fires.

To contain stubbornly high inflation, the Chinese central bank has raised the benchmark interest rate three times this year, including the latest rate hike of 25 basis points announced on July 6. In an attempt to rein in excess lending, it has also hiked the reserve requirement ratio six times, ordering banks to keep a record high of 21.5% of their deposits in reserve.

Even with inflation surging, the Manufacturing Output Index fell to 47.2 in July – the lowest in 28 months, and indicating contraction. China’s automobile industry, which overtook the US in 2010 with sales of 18 million autos, has experienced a dramatic slowdown, with growth of only 3% through June versus 32% growth last year. For all of 2011, the China Association of Automobile Manufacturers expects sales to decline versus 2010.

Real Estate Out of Reach

In response to the 2008 worldwide financial collapse, Chinese authorities unleashed $2.1 trillion of stimulus, or almost 33% of GDP. This compares to the US stimulus of $800 billion, or 5.5% of GDP, spent on worthless Keynesian pork. Unlike the US, where no jobs were created, China’s command-and-control structure funneled the stimulus into building cities, malls, roads, office buildings, and residential units. *Millions of Chinese were employed in creating properties for which there was no demand.* Moody’s approximates that China’s banks have funded at least RMB 8.5 trillion (US$1.3 trillion) of the RMB 10.7 trillion of outstanding local government debt, which was a significant portion of the 2008 national stimulus package. When the central authorities tell the banks to lend, the banks ask, “How much?” The result has been soaring real estate inflation and malinvestment.

Everyone has seen the pictures of the ghost cities (Chenggong) with no inhabitants; ghost malls (South China Mall, Dongguan Mall) with no shoppers; residential towers with no residents; and roads with no cars. Analyst Gillem Tolluch scene in China today:

China consumes more steel, iron ore and cement per capita than any industrial nation in history. It’s all going to railways that will never make money, roads that no one drives on and cities that no one lives in. It’s like walking into a forest of skyscrapers, but they’re all empty.

There are 218 million urban households in China, and the central government ordered local governments to build 36 million more units by 2015. They just have one small problem: Prices for apartments in Shanghai and other major metropolitan areas have soared by over 100% in the last five years.

The average size of a “cheap” apartment in second-tier Chinese cities is 60 square meters (650 sq ft) and fetches an average price of $1,230 per square meter, or $73,800. Mid-tier apartments in Shanghai or Beijing sell for $3,500 per square meter, or $210,000 for an average size apartment. “When prices are over 20 times more than annual household income, it’s not affordable,” says Andy Xie, an independent economist in Shanghai. Millions of working Chinese have been priced out of ever owning property and blame the corrupt local government cronies and connected speculators. Anger is simmering among the masses.

Confirming the overvaluation, a report by the Chinese Academy of Social Science points out that in the country’s metropolitan centers today, house prices per square meter generally amount to between 50% and 100% of average annual incomes. “To secure a flat of 90 square meters, an average working family in Beijing and Shanghai will have to work for more than 50 years to pay off their loans, compared to five to 10 years in the developed world,” according to the report. Report authors Lu Ding and Huang Yanjie conclude that, “ky-high housing prices have undermined housing affordability and caused great anxiety and resentment among the public, who are wary of the conspiracy among ‘speculators’ – developers and government officials in charge of real estate businesses.”

House of Cards

China has methodically and relentlessly grown their economy for the last thirty years. However, as the US and Europe discovered the hard way with their real estate busts, if one makes an abundance of cheap-money loans to speculators, prices will rise far above the true value of the asset bought with the debt. And in time, the bubble must burst. The pressure in this bubble is mounting. Andy Xie lays out the real situation on the ground in China:

No other government in the world would spend that kind of money. If you go to local Chinese cities, you will see what they spent that money on: Tens of millions on just trees, parks and government buildings.

All of the major ratings agencies are warning about an impending banking crisis in China. Fitch downgraded the country’s credit rating and warned there *was a 60% chance the Chinese banking system will require a bailout in the next two years*. Just like the US, China has too-big-to-fail banks, with five banks accounting for 50% of the lending in China. In a July 2011 report, Moody’s cautioned that the non-performing loans on the balance sheets of Chinese banks could rise to between 8% and 12%, versus the 1% proclaimed by Chinese officials. China’s regulators have belatedly applied the brakes, but it is too late. The house of cards looks susceptible to just the slightest of breezes.

Fraser Howie, the coming collapse:

If you are going to address the misallocation of capital in the banking system and credit system, that’s going to have huge knock-on effects on the profitability and viability of the banks. And if there were a major banking crisis, you would start to see money trying to get out of China. It’s almost far too complicated to contemplate.


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## tothemax6 (18 October 2011)

Mr Z said:


> Doesn't surprise me as you specifically go out of your way to call people thugs. Not a great tactic if you want to be seen as credible.



No not 'people', that was just you. Everyone else here is fine.
I probably should have checked that you were the OP for this thread before I touched it.

So: tothemax6 says once more, undoubted China construction bubble, crash coming, history will be my judge, signing out.


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## Mr Z (18 October 2011)

tothemax6 said:


> So: tothemax6 says once more, undoubted China construction bubble, crash coming, history will be my judge, signing out.




LOL, visionary, just visionary! Got anything more useful? My abusive little friend!


----------



## Starcraftmazter (18 October 2011)

Mr Z said:


> Well yeah it kinda does, recovering from over supply where demand is not leveraged to the hilt is a lot less of a bubble than recovering from over supply and credit pumped demand.




Well one thing to consider is the structure of the demand vs supply. It's one thing to say there's a demand for housing, but it's another to say there is a demand for "luxury" housing (by Chinese standards) which is being built, if the people who do not yet own such property simply do not and can never hope to make enough money to afford it.

Another thing to worry about is that even a 20-30% fall will see a lot of the middle/upper middle class people lose very significant amounts of money (and going by interviews I have seen with them, these people are not at all aware of the fact that RE can actually go down in value), which is not good considering internal consumption for consumer goods is already very low in China. This will cause the aspiring middle class to consume even less in the economy - at a time when the Chinese central government is frantically trying to boost internal consumption.




Mr Z said:


> Yes and it appeared more emotional than deductive. Pardon me if I want to cut past emotion and look for fact.




I fail to see how, all my analysis are reasonably sound. I hold no investments which are either long or short on China.




Mr Z said:


> We don't have a free market anywhere in the world today, government are twisting the fates of all of the largest economies, they are all deeply perverted in one way or another. .... Is inevitable being confused with imminent?




I agree. And my point is that the more the government interferes with the markets, the worse the economy of that country will end up. I also agree that there are economic problems virtually everywhere (but not entirely) in the developed world, however it is because they do exist, and because China is ill-prepared and ill-suited to deal with them, that I think they will be hit particularly hard. Instead of implementing strong reforms to make their economy more market driven, they have relied ever more on a construction bubble to keep the magical gdp growth figures flowing. To me this just reeks of corruption and incompetence.



Mr Z said:


> With all due respect, we have China over investing and the US under investing both heading for a wreck. After the wreck China will still have the investment, which if you are going to wreck anyway is a better way to go. At least China will have something for the pain, the US on the other hand?! That goes for the factory overbuild and all the other industrial follies that have been pointed out, in the end they  will still own the capacity where as the US has been gutted. Much like the US's rise to prominence IMO, well so far... that kinda assumes that China makes it to the top. The demographics are the strongest argument against that IMO.




Well once again, I don't disagree with any of that. It seems we are both in agreement that there will be some sort of a crash, the difference in views being on the size and/or end result.

I cannot begin to predict what will happen afterwards or the scale of it. It is very hard to tell. I think it will depend on China's role in the new economy after the recession/depression we may well face. At the end of the day, they have 2 things to keep growth going;

1. Production capacity
2. Foreign exchange reserves

Now (1) will only be good if there will be some semblence of demand, and if the developed countries choose not to move to protectionist policies that would negatively impact China's exports.
And (2) will only be good if the developed countries' who's debt China now holds choose not to inflate away their debt problems.

Granted, both of these sound somewhat drastic, but these are desperate times we are living in.


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## Mr Z (19 October 2011)

*Stratfor*

*Manufacturing a China crisis*


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## Starcraftmazter (19 October 2011)

Bad rental yields in China


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## Mr Z (20 October 2011)

*Jim Rodgers*


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## Logique (20 October 2011)

Nice histogram of responses going there Mr Z, although there's 2 don't knows.  

Can't claim any great insights on China, but I voted with most (so far) others - near term bear, long term bull.


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## notting (20 October 2011)

More cheating and deliberate  global financial destruction implemented by the Chinese communist party.  This time solar panels.

http://www.cnbc.com/id/44968075


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## Mr Z (20 October 2011)

Ahem! The Americans, of all the people on this planet, have no right to bitch about subsidies! Jeez Louise, we'd better off down here if they didn't push $20 billion a year into their farms. I'd rather that there where none at all but this is throwing stones in glass houses.


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## notting (20 October 2011)

The US is the clear champion, innovator of free markets.
The US does help out it's farmers which when you listen to the above video makes a little sense.

China on the the other hand has no free market what so ever.  It's all controlled by the the Communist rulers and anything that looks like it's powering along without them is taken by them!
China is motivated by the intent to destroy industries abroad to gain power is *very different* to helping out your dying farmers.  Of course the US is not perfect but it's very different.
Saying that US should not throw stones is like China lecturing Australia on human rights in long winded monologues when human rights issues are raised.  China does this to monopolise the time spent on human rights discussions to avoid questioning and any accountability for the daily unthinkable atrocities they continue to perform on unprecedented scales all over the place.


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## Mr Z (20 October 2011)

The US should not throw stones over subsidies, especially at the country that is bank rolling them! China is also subsiding the entire US! Do they wanna bitch about that as well? Nah mate the yanks are a classic for "heads I win tales you lose" deals! It is kinda funny to see them cop it back and whine about it! 

The yanks are always whining about their loses to China but never acknowledging they'd be screwed with out them.

The greatest free trade nation that never was... the USA calling for more tariffs, LOL gimme a break. Pot calling the kettle black.


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## notting (20 October 2011)

Mr Z said:


> . Pot calling the kettle black.




So let's hear your long list of examples where China is freer than the USA to back up your revolutionary and profoundly insightful statement.


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## Mr Z (20 October 2011)

notting said:


> So let's hear your long list of examples where China is freer than the USA to back up your revolutionary and profoundly insightful statement.




You are wandering off the goat track there! We are talking about trade and how its conducted not freedom. 

Don't get sarky chump.


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## notting (20 October 2011)

Mr Z said:


> You are wandering off the goat track there! We are talking about trade and how its conducted not freedom.




Free trade examples perhaps?
Please.  
If the kettle is black it must be easy to let rip with them all.
Sport.


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## Mr Z (20 October 2011)

WOW, you really seem to beleive that their poo don't stink, you must be a yank!  Later dude.


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## notting (20 October 2011)

Mr Z said:


> WOW, you really seem to beleive that their poo don't stink, you must be a yank!  Later dude.




I will hold my breath don't be long!


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## Dowdy (20 October 2011)

China isn't a true free market economy (they're banks were proped up just like the USA) but they're probably the most capitalistic nation today.


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## notting (20 October 2011)

Yes, the leaders just like the Russian leaders are ultimate capitalists.
Trouble is, no one else is allowed to be.


> "Opposition leader Tony Abbot has indicated he will shift Australia's stance on trade with China should the coalition be installed into government at the next election, accordion to Fairfax Media.
> 
> Mr Abbott said he would put free trade agreement talks with the emerging giant, which began over five years ago under John Howard, on hold, to focus on Australia's relationship with Japan.
> 
> ...


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## Dowdy (20 October 2011)

notting said:


> Yes, the leaders just like the Russian leaders are ultimate capitalists.
> Trouble is, no one else is allowed to be.




Just like the USA leaders are ultimate central planners


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## notting (20 October 2011)

This Guy in the above video is a book peddling idiot.
China sold 50B of Treasuries just last week!! He said China can’t sell them.
China should keep this up to raise their dollar which will give them more buying power in the current tanking global economy to buy global commodities.  US treasuries are being snapped up by everyone else freaking out about Europe it’s perfect for China to sell now, they are shrewd traders.
Further, this nob in the video claimed it’s easier to start up a business in China than the US.  
Total rubbish.  
You have to be a connected China man to get any significant business off the ground. 
Foreign investment is raped and gutted in China and normally fails.  Pretty much the only foreign thing that has worked is the use of China’s labor force and that has just led to mass counterfeiting and stolen technology - fake, copy cat factories which compromise the original foreign brand even fake Apple stores.
Take Google for example, it was *allowed* to enter the Chinese market with *excessive regulation, pay offs  and constant government censorship and spying* then was ripped off by Government controlled Baidoo, then manipulated into irrelevancy, as was Fosters, Telstra etc etc.  All losing Billions for their efforts.  
That’s not how the US works believe it or not.
It’s also not what will ultimately work in the end either.
I'm boaring myself crapping on about China don't think I can stomach much more of it.
If it's not obvious to you by now well


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## Dowdy (20 October 2011)

notting said:


> This Guy in the above video is a book peddling idiot.
> China sold 50B of Treasuries just last week!! He said China can’t sell them.
> China should keep this up to raise their dollar which will give them more buying power in the current tanking global economy to buy global commodities.  US treasuries are being snapped up by everyone else freaking out about Europe it’s perfect for China to sell now, they are shrewd traders.
> Further, this nob in the video claimed it’s easier to start up a business in China than the US.
> ...





That guy in the video predicted the housing collapse, the GFC, and the gold bull run so maybe you should do a bit more research into your foolish responses. Calling someone a idiot/ nob just weakens your argument 
50b out of what - 3 trillion lol. Not even a drop in the water. Maybe you should try and run a business to see how hard it is to work around red tape

Watch these clips to see USA red tape. 2nd is a 6 part series






Back on topic - In relation to China, i'm an extreme bear near term (3-5years) but extreme bull long term (30-50 years)


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## Starcraftmazter (21 October 2011)

^ That is a hell of a good video, thanks for sharing.


I will also comment that China cannot simply sell US treasuries (in any sizable quantities). This would cause it's currency to appreciate - which they do not want.


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## notting (21 October 2011)

Starcraftmazter said:


> I will also comment that China cannot simply sell US treasuries (in any sizable quantities). This would cause it's currency to appreciate - which they do not want.




They haven't wanted it till now.  It maybe limited to think that might not change as it becomes convenient to create mega wealth from an appreciating currancy after they have bankrupted the rest of the world. 
Then buy everything.


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## Mr Z (21 October 2011)

*Out of bullets?*

*Dr. Jim Walker: Weakness in China Ahead””Translating into Commodity Bear Market*


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## Starcraftmazter (21 October 2011)

notting said:


> They haven't wanted it till now.  It maybe limited to think that might not change as it becomes convenient to create mega wealth from an appreciating currancy after they have bankrupted the rest of the world.
> Then buy everything.




That does not make any sense. You do not want your currency to be strong, it's bad for exports and will create trade deficits.

Nor is it clear exactly what the RMB would be valued at if it was a free float, but it will be significantly higher causing China's exports to become uncompetitive (or at least much less competitive), which would result in the greatest imaginable turmoil for the country.


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## notting (21 October 2011)

Starcraftmazter said:


> the greatest imaginable turmoil for the country.




Yeah but you gotta remember that they don't really care about the people.
They have a massive army to protect themselves against there own peoples social unrest.

I know I'm getting very extreme at this point and that it is common thought that they wish to avoid social unrest.  However, they have a history of being able to manage social unrest with fear and brutality a la Burma a few years ago(who were taking advice from China at the time on how to quell the unrest), China during the Olympics and not to mention Tiananmen Square where they machine gunned all the people, captured any innocent by stander that may have witnessed it(including people in flats near by), burned all the bodies and got on with* their business*.
Hopefully with all the mobile phone cameras etc these days they can no longer do this.  But in a poor place where they bribe people to dob in anyone to who talks against the regime etc etc.  They have a pretty powerful grip.


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## Tysonboss1 (21 October 2011)

notting said:


> Yeah but you gotta remember that they don't really care about the people.
> 
> They have a massive army to protect themselves against there own peoples .




Soldiers are people too,


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## Tysonboss1 (21 October 2011)

disarray said:


> they may just piss someone off enough to get slapped hard for it,
> .




And the one brave enough to slap, may leave with a bloody nose. No one is going to start china, People were scared of russia, china is going to be a real force compared to russia, no one would start military action against china no matter what the do, out side of open declaration of war.


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## Mr Z (21 October 2011)

*The Coming China-India Conflict: Is War Inevitable?*

There is a school of thought that say the US will provoke this conflict and fight China by proxy should push come to shove over resources.

I'm too stupid to know other than history teaches us that wars often occur in commodity cycles after trade tensions rise.


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## Tysonboss1 (21 October 2011)

Mr Z said:


> *The Coming China-India Conflict: Is War Inevitable?*
> 
> There is a school of thought that say the US will provoke this conflict and fight China by proxy should push come to shove over resources.
> 
> .




I doubt it, I seriously doubt it.

Both sides have so much to lose, there may be tension and some version of a cold war, but thats it.


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## Mr Z (21 October 2011)

There are a number of ways this could unfold that could lead to war. For example a serious economic crash in China could lead to civil unrest and it would not be the first time that a countries leadership has used an external threat to maintain internal power, it is a very tried and true method of uniting a country.

Every country that has gone to war has had a a lot to lose but they still did it. Look toward what the leadership has to lose first, like they say about the US the only unemployment number that really counts is Capitol Hill's, maybe that applies to Beijing equally. This is not cut and dry by any means and human history says if it gets tight we fight.

The money spent on military buildup in China is supposed to be double the publicly announced number. While it is not to US standards it still has the US very concerned at the motivation for such expenditure -------> you have to wonder, is it fear or is it ambition?  

I'm not betting on it as an outcome but I will not discount it as an option.


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## Mr Z (21 October 2011)

*John Stossel - Serious Crony Capitalism*

This Stossel guy is a lot of fun  Thanks Dowdy, I'd never seen him before.



Yey USA 

This is the sort of crap that happens in China isn't it?


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## disarray (21 October 2011)

Tysonboss1 said:


> And the one brave enough to slap, may leave with a bloody nose. No one is going to start china, People were scared of russia, china is going to be a real force compared to russia, no one would start military action against china no matter what the do, out side of open declaration of war.




doesn't have to be conventional. stuxnet took out irans nuclear facilities without a shot being fired. cyber warfare can take out electricity grids, communications networks, industrial control systems, you name it. i would put the US cyber warfare division as light years ahead of any other national cyber division.

why bother getting into the mess of a conventional war when you can disable an enemy over the net? and anyway if push did come to shove, the US would beat the everliving **** out of china, i don't care what the sino-fanboys and their zerg rush appreciation society says.


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## Mr Z (21 October 2011)

disarray said:


> why bother getting into the mess of a conventional war when you can disable an enemy over the net?




While it may be possible to do a number of things over the net disabling an enemy is a stretch, they are simply not THAT vulnerable.



disarray said:


> and anyway if push did come to shove, the US would beat the everliving **** out of china, i don't care what the sino-fanboys and their zerg rush appreciation society says.




The US's history of cocking up small wars suggests that this is not the case, unless they get to use the nukes I'd not be betting that they would make a clean sweep of China.


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## Mr Z (21 October 2011)

disarray said:


> doesn't have to be conventional. stuxnet took out irans nuclear facilities without a shot being fired. cyber warfare can take out electricity grids, communications networks, industrial control systems, you name it. i would put the US cyber warfare division as light years ahead of any other national cyber division.




As a guy who made his living in Internet security I'd like to know how you can be so sure of this?


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## Tysonboss1 (21 October 2011)

disarray said:


> the US would beat the everliving **** out of china.




neither side would be able to have a decisive victory over the other with out resorting to nuclear weapons.

The USA would never be able to land and hold ground inside china and have a true victory, and china would never beable to land and hold ground inside the USA.

It would be the worlds most expensive and earth shattering war and would have to end in a stale mate, It would not be worth it for either side.

What would they possibly have to gain.


----------



## Tysonboss1 (21 October 2011)

disarray said:


> their zerg rush appreciation society says.




If anything, When it comes to conventional warfare it is the USA that has used the Zerg rush, Think D-day and the push to berlin, 

The Americans lost nearly 5 American soldiers for every German they killed in those Battles. Talk about a pyrrhic Victory. If they tried similar against the chinese, it would not end well.


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## Mr Z (21 October 2011)

Tysonboss1 said:


> What would they possibly have to gain.




The world has a population problem and the US has a nuclear solution. How is that for a dark thought? One thing for sure is that if it happens it will not be about what it is purported to be about and if you think to carefully about what it is purported to be about it will not make sense.


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## Mr Z (21 October 2011)

Tysonboss1 said:


> If they tried similar against the chinese, it would not end well.




If the Chinese where truly mobilized they would have to test their idea that a limited tactical war was winnable, I agree that they just couldn't manage it in traditional face off on the ground. It would just be too hard + I doubt that gaining territory would be the objective.


----------



## disarray (21 October 2011)

Mr Z said:


> While it may be possible to do a number of things over the net disabling an enemy is a stretch, they are simply not THAT vulnerable.




and you know this how? if cyber weapons are capable of messing with the PLC controllers that manage centrifuge speeds inside a nuclear plant then they are capable of messing with all sorts of control systems. the future is here now believe it or not, its far beyond a case of "lol my windows box got hacked", we're talking electricity grids, power plants, transport systems, water management, telecommunications systems and any other piece of critical social infrastructure you can conceive of being vulnerable to engineered and targetted cyber weapons.



			
				Mr Z and tysonboss said:
			
		

> invade and occupy china lol




they don't need to invade, occupy or even land troops on the mainland. there's no point occupying china, just ruin their infrastructure and let it collapse under its seething mass of humanity. but the whole china vs US armchair general games are just theorycrafting and is purely a matter of opinion so lets not get into a 10 page diatribe ridden derail on what if's.

anyway the US is setting up the arab world for its next world war. the arab spring will lead to islamist takeovers throughout the middle east and voila, instant enemy! /tinfoil hat



			
				Mr Z said:
			
		

> As a guy who made his living in Internet security I'd like to know how you can be so sure of this?




start with this really good article and google the rest to your hearts content.


----------



## choofer (21 October 2011)

disarray said:


> and you know this how? if cyber weapons are capable of messing with the PLC controllers that manage centrifuge speeds inside a nuclear plant then they are capable of messing with all sorts of control systems. the future is here now believe it or not, its far beyond a case of "lol my windows box got hacked", we're talking electricity grids, power plants, transport systems, water management, telecommunications systems and any other piece of critical social infrastructure you can conceive of being vulnerable to engineered and targetted cyber weapons.
> 
> 
> 
> ...




Its not the plc that get stuffed but the SCADA controlling the PLC. Most SCADA on this scale is on UNIX not MICROCRAP.


----------



## Mr Z (21 October 2011)

disarray said:


> and you know this how?




Because most major infrastructure existed well before the internet and is not dependent on it in any way shape or form. The technology is often simply not that sophisticated, they can simply unplug whatever connectivity exists and get things back up again should any attack cause an issue. Besides how stupid would you have to be to have mission critical infrastructure dependent on the web with no redundancy. You think they are actually that silly?  




disarray said:


> if cyber weapons are capable of messing with the PLC controllers that manage centrifuge speeds inside a nuclear plant then they are capable of messing with all sorts of control systems. the future is here now believe it or not, its far beyond a case of "lol my windows box got hacked", we're talking electricity grids, power plants, transport systems, water management, telecommunications systems and any other piece of critical social infrastructure you can conceive of being vulnerable to engineered and targetted cyber weapons.




LOL... only if they run windows, which the Chinese don't.  

Like I said causing problems is one thing but disabling is another thing altogether. The future was here a while back... and these issues have been thought through, trust me.



disarray said:


> they don't need to invade, occupy or even land troops on the mainland. there's no point occupying china, just ruin their infrastructure and let it collapse under its seething mass of humanity. but the whole china vs US armchair general games are just theorycrafting and is purely a matter of opinion so lets not get into a 10 page diatribe ridden derail on what if's.




Yeah look, you are severely overestimating the damage they can do and underestimating the ability to recover. They have a good level of redundancy in major infrastructure and can normally operate in isolation if needs be. Anyone with any sense would make sure this is the case, to think that they would allow national infrastructure to completely vulnerable is a cyber fantasy. The cyber security industry are great ones for over selling the threats.



disarray said:


> anyway the US is setting up the arab world for its next world war. the arab spring will lead to islamist takeovers throughout the middle east and voila, instant enemy! /tinfoil hat
> 
> start with this really good article and google the rest to your hearts content.




They assume that Stuxnet destroyed about 10% of Irans centrifuges, not quite what you call disabling but certainly a disruption, which is what I reckon is the most they would achieve. For a cyber attack to be effective it would have to be a part of a strategic offense that involves other forms of attack that take advantage of whatever outage the cyber crew can create.


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## Mr Z (21 October 2011)

choofer said:


> Its not the plc that get stuffed but the SCADA controlling the PLC. Most SCADA on this scale is on UNIX not MICROCRAP.




LOL yeah... mission critical on Windows is just asking for this sort of crap to happen!


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## Starcraftmazter (22 October 2011)

notting said:


> Yeah but you gotta remember that they don't really care about the people.
> They have a massive army to protect themselves against there own peoples social unrest.




I can't help but disagree with everything you're saying. China is a complex country of 1.4Bn people. It's government has very crude tools to try and control it - it's one overriding objective is to maintain social order.

In the last half a decade or so, China has significantly downsized it's military. There is absolutely no way they could every hope to control any sort of significant uprising. The scenario you propose is simply nonsense.



Mr Z said:


> *The Coming China-India Conflict: Is War Inevitable?*
> 
> There is a school of thought that say the US will provoke this conflict and fight China by proxy should push come to shove over resources.
> 
> I'm too stupid to know other than history teaches us that wars often occur in commodity cycles after trade tensions rise.




I don't think it will happen. China and India have had historically frosty relations, and people have been predicting all sorts of conflicts between them for a long time now, but things have actually only gotten better.

China had similarish territorial and interest differences with Russia very recently - but those got settled, and now they are "best buddies" so to say. Both governments are corrupt and are *not* driven by ideology. They have too much to gain and too much to lose by entering into any sort of conflict.




disarray said:


> doesn't have to be conventional. stuxnet took out irans nuclear facilities without a shot being fired. cyber warfare can take out electricity grids, communications networks, industrial control systems, you name it. i would put the US cyber warfare division as light years ahead of any other national cyber division.




And yet it is the Chinese that have been causing havok in the US and around the world as of late, in terms of cyber warfare. Do not underestimate China in this department. In fact much of the smartest engineers in USA are Chinese or other immigrants...their education system simply isn't what it used to be.



disarray said:


> why bother getting into the mess of a conventional war when you can disable an enemy over the net? and anyway if push did come to shove, the US would beat the everliving **** out of china, i don't care what the sino-fanboys and their zerg rush appreciation society says.




I fail to see how. China and Russia are formally allied, and either one of them individually could easily take on a US invasion. I don't care what _US-fanboys_ say, the way military hardware stacks up, US does not have any sort of edge whatsoever over Russia/China. Nor does it have the numbers. Nor will it have the terrain advantage.

But getting back to economics. You do realise this would cause a complete collapse of the world economy in every way imaginable? This would then bring us back to the total war doctrines of WW1 & 2.

Now consider this, at 10% unemployment and closing on 20% underemployment, for a population extremely pissed off with bankers and politicians, can you really ask them to work in factories and go through austerity just to wage war on another country? The mentality of the populace today is very different than that of the great depression.

How are the elite going to make money off this?


There will not be any significant conflict on our planet anytime soon. We simply live in a completely different world now, where it benefits nobody to have conflict between any major countries.



disarray said:


> start with this really good article and google the rest to your hearts content.




Stuxnet is a joke. Nothing remotely serious is running on Windows in any country of importance, and many countries (even Western ones) have made commitments to completely end it's use in government, and especially military.

What they use are GNU/Linux and BSD derivatives. Secure as secure can be, there is simply no way they can be hacked. The most foreign governments can do is launch denial of service attacks which are pretty meaningless to the defense intranets anyway.


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## choofer (22 October 2011)

What they use are GNU/Linux and BSD derivatives. Secure as secure can be, there is simply no way they can be hacked. The most foreign governments can do is launch denial of service attacks which are pretty meaningless to the defense intranets anyway. 

Love it. So back to bits and bytes.

How do I learn assembler? 

Give me another vinho pls


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## mullokintyre (18 October 2021)

Starcraftmazter said:


> I can't help but disagree with everything you're saying. China is a complex country of 1.4Bn people. It's government has very crude tools to try and control it - it's one overriding objective is to maintain social order.
> 
> In the last half a decade or so, China has significantly downsized it's military. There is absolutely no way they could every hope to control any sort of significant uprising. The scenario you propose is simply nonsense.
> 
> ...



Today i was reading about the  latest technology race where the Chinese have lapped the rest of the world.
From Zero Hedge


> The world learned on Saturday evening that *China had made "astounding progress on hypersonic weapons and was far more advanced than U.S. officials realized,"* sources told F.T.
> 
> In August, the Chinese military launched a rocket that catapulted a hypersonic glide vehicle into low-Earth-orbit. It flew around the world before missing its target by only two dozen miles, three sources said.





> The latest test raises an abundance of questions about China's rapid military modernization, which is beating the U.S. in the hypersonic weapons race.
> 
> _*"We have no idea how they did this," *a fourth source said, referring to China's ability to fly a hypersonic glide vehicle across the world._



Chinese technology has now overtakebn pretty much everyone else.
Welcome to the new world order.
The previous post in this thread stretches back to  2011, some ten years ago. It is interesting to read people 's thoughts on China from ten years ago.
Not sure if the statement about Chinese Military being down sized has turned out as a great prediction.
Mick


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## moXJO (19 October 2021)

Nope read it wrong


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## againsthegrain (3 November 2021)

Looks like there is a bit of panic with officials warning to stock up on food amid fears of shortages in the great eastern land of dreams


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