China's Economy

[Tyler Durden]

I saw that segment on 60 Minutes and was amazed. As I watched it, I thought, even if people in China could afford it, they would choose to buy property overseas instead, which is exactly what they're doing.

 

[FlyingFox]

I saw that segment on 60 Minutes and was amazed. As I watched it, I thought, even if people in China could afford it, they would choose to buy property overseas instead, which is exactly what they're doing.

And next you will have empty apartments in Sydney, Melbourne, London, New York ....

 

[CanOz]

And next you will have empty apartments in Sydney, Melbourne, London, New York ....

Wouldn't that be an ironic twist...the Chinese offloading thier overseas real estate at fire sale prices back to the people that sold them the places at fire sale prices in the first place! Lol...

CanOz

 

[FlyingFox]

Wouldn't that be an ironic twist...the Chinese offloading thier overseas real estate at fire sale prices back to the people that sold them the places at fire sale prices in the first place! Lol...

CanOz

lol...I am sure there are some interesting times ahead, especially since the Chinese are being touted as the great saviors of the Aussie housing market.

 

[DB008]

I saw that segment on 60 Minutes and was amazed. As I watched it, I thought, even if people in China could afford it, they would choose to buy property overseas instead, which is exactly what they're doing.

The Chinese 'Ghost Towns' have been around for a while.

I'm surprised it took 60 minutes this long to latch onto a story about it.

 

[Aussiejeff]

China suspended the release of industry-specific data from a monthly survey of manufacturing purchasing managers, with an official saying there’s limited time to analyze the large volume of responses.

http://www.bloomberg.com/news/2013-...-in-added-hurdle-for-scrutiny-of-economy.html

Looks like they are trying to save some face.....in the face of deteriorating economy

 

[CanOz]

http://www.bloomberg.com/news/2013-...-in-added-hurdle-for-scrutiny-of-economy.html

Looks like they are trying to save some face.....in the face of deteriorating economy

Not enought time to doctor...err I mean analyze the numbers. What a joke.

I bet the market doesn't like this crap.

They'll find out the hard way that you can't fool the market for long.

CanOz

 

[sinner]

They'll find out the hard way that you can't fool the market for long.

I didn't realise the market looked like it had been fooled? Unlike Chinese realestate, stocks have been on markdown since the GFC.

 

[CanOz]

I didn't realise the market looked like it had been fooled? Unlike Chinese realestate, stocks have been on markdown since the GFC.

Its been a slide for sure Sinner, i guess i'm expecting a more dramatic sell off.

I'm probably wrong...

CanOz

 

[sinner]

Its been a slide for sure Sinner, i guess i'm expecting a more dramatic sell off.

I'm probably wrong...

CanOz

I don't have a horse in the race either way (yet), except for through whichever underlying stocks in various indices I hold which may have China exposure.

One valuation metric which is useful for applying across countries is the "Total Market Cap / GNP" ratio, which I couldn't get a hold of, but the World Bank has historical data for TMC/GDP, which is a close enough proxy I guess (they released the 2012 datapoint EOFY, a bonus for us). A quick chart:



A shorthand forecast using the 2012 TMC/GDP number assuming 2%/annum growth in EPS and 2% dividend yield:

1.02 * (0.65/0.449)^(1/10) - 1 + 0.02

(as per http://www.hussmanfunds.com/wmc/wmc130318.htm)

returns a (crude but effective) forecast 10Y nominal total return of 7.8%/annum, which isn't backup the truck zone (considering the potential for volatility), but certainly priced significantly cheaper than a lot of other country indices. A similar but more generous forecast for the US (6% EPS growth and 2% yield, but TMC/GDP is much much higher) only returns a forecast return of 3-4%/annum.

 

[Tyler Durden]

Very interesting read. I think the author backfires in his attempt to persuade people of the pros of shadow banking. China collapse coming soon.

China’s shadow bankers are easy to demonise. Like Wang, many are nicotine-stained and seemingly unsophisticated. Their methods are unorthodox, possibly even unsavory. Their loans don’t show up on any balance sheets. They look like a disaster waiting to happen.

I believe these fears are misplaced, and I should know: Eight months after my visit to Hangzhou, I became a shadow banker myself. Since 2011, I have run a microcredit firm in Guangzhou, which provides loans to thousands of small-scale entrepreneurs: florists, restaurateurs, fish farmers, vegetable growers, roadside hawkers.

Although we charge about 24 per cent annually for our money, demand remains virtually unlimited. Our customers are too small and too unstable to get traditional bank loans. At the same time, because we keep our loan amounts small - $US20,000 apiece on average - and because we have close contact with our clients, the business has proved reasonably secure. Our bad debts have not strayed above 5 per cent since the firm was founded five years ago.

http://www.smh.com.au/business/china/why-i-became-a-shadow-banker-in-china-20130709-2pnvi.html

 

[MrBurns]

This is why they may rule the world one day -

 

[MrBurns]

I'm told by someone who does a lot of business there that the empty cities as shown on 60 minutes will be filled and not to take any notice of reports to the contrary..............for what it's worth.

 

[Aussiejeff]

I'm told by someone who does a lot of business there that the empty cities as shown on 60 minutes will be filled and not to take any notice of reports to the contrary..............for what it's worth.

"One person's view does not an economy make.." - old Chinese proverb.

 

[MARKETWINNER]

In the short run there will be some slow down in Chinese economy. In the long run they will have growth. At least their huge population will create demand for basic things in good or bad times. More than yellow metal they will consume more food and other basic things in the coming two decades.

It is very simple. High number of mouths in China is going to create lot of demand for some things. They will have less arable land in the future. They cannot produce everytign locally in the future and they will have to import from other countries. In addition they will have word market for some of their products in the coming decades.

Some of the concerns that I have about China are environmental pollution, credit and property market.

My ideas are not a recommendation to either buy or sell any security,commodity or currency. Please do your own research prior to making any investment decisions

 

[noirua]

China's June trade falls in new sign economy fading | Business | Seattle News, Weather, Sports, Breaking News | KOMO News
http://www.komonews.com/news/busine...lls-in-new-sign-economy-fading-214913241.html

 

[sinner]

More Pettis, in advance, from Mish

http://globaleconomicanalysis.blogspot.in/2013/07/china-urbanization-growth-fallacy.html

Meanwhile in all the excitement over WMP and SHIBOR we risk losing sight of the fact that, contrary to what a lot of analysts are suggesting, the problem in China is not that there are specific areas of risky lending that need to be controlled. The real problem is that increased economic activity is inextricably tied to unsustainable increases in debt, and this is a system-wide problem. It will prove impossible both to control increasing financial risk and to keep growth even at current levels. Any attempt to crack down on one form of bad lending will only cause another form of bad lending to surge, and if Beijing really wants to control the worsening financial risk it will have to tolerate growth rates of 3-4% or less.

Hello from monsoony India!

 

[sydboy007]

From macrobusines today

China’s most famous ghost city busts

Ordos in inner Mongolia has regularly been cited as the quintessential example of China’s unsustainable construction-led economy.

In 2009, AlJazeera posted an explosive video showcasing Ordos’ ghost apartments and frenetic pace of construction, which exemplified the “build it and they will come” approach that has underpinned the Chinese economy. AlJazeera provided a follow-up in 2011, which was equally revealing.

Then Business Insider posted a slideshow of China’s empty cities, headlined by Ordos.

And in late 2011, a video from NTD Television showed how Ordos’ home prices were crashing, having fallen by almost one-third. Meanwhile, construction had finally ground to a halt, leaving many construction workers unemployed.

Then last year, a video from the Atlantic followed a group of skaters through Ordos, showing a city that appeared almost completely empty three years after Aljazeera’s first ground-breaking report.

Now it appears the city has gone bust. According to Bloomberg, apartment sales have ground to a halt and a myriad of cranes now stand silent amid half finished developments:

“In the past few years there was a lot of coal so people came from all over the country,” says Gao Wei, 30, smoking in an office that deals in second-hand construction machinery and had no clients that day. “Now the economy has collapsed, they’ve all gone”…

Fueled by a boom in coal production, Ordos saw a building spree in recent years, with an expanded airport, a sports stadium and the new area of Kangbashi where high-rise apartments surround an artificial lake. Many local residents owned two to three homes each…

Now the local government’s revenue is falling because the property crash has scuppered land sales, while residents no longer have compensation to buy property and make loans… About 70 percent of Dongsheng district’s real estate market was funded by private lending that has now stopped…

When the government sold land over the past few years, it always used the funds for infrastructure construction, Zhang said from the sales office of a new apartment complex with 1,000 units. “Now they don’t have any money.” Meantime, the city’s coal rush has dried up amid sluggish domestic demand, with prices dropping to an almost four-year low.

That hasn’t stopped efforts to keep the boom going…

Some Ordos district governments had to borrow money from companies to pay municipal employees’ salaries…

“Ordos is a warning to other places in terms of how to guide the local economy and in what not to do,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. “The local governments are still not waking up to what they should do in this new environment”…

Consider for a moment how much of Australia’s iron ore and coking coal has gone into the construction of such projects, and what will happen to commodity prices when construction across China inevitably slows.

 

[notting]

“The local governments are still not waking up to what they should do in this new environment”…

They are not asleep they are still suckering in the population with the fake media commentary on real estate investment bonanza, and forcing the less able communities like the farmers off their traditional farm land by force selling their land and making them buy apartments with the money.

It usually leaves the ex-farmers and their children enslaved to paying off the rest of the apartment for the rest of their lives.

With no means of making money the family, including the children are used in slave labour and daughters of 10 or older get forced into prostitution if they are good looking enough to pay off the family debts because they have no other way of making money without their land. Often the family is tricked into signing the mortgage thinking there will be no more to pay. They are then intimidated into thinking it was their fault and if they dare speak up they will be sent of to reeducation slave labour camps to pay off their debts. The community will be told they are bad people not paying their debts.

Generally the collateral up front pays off the costs of the apartments so there is not too much debt in reality, as they have to cough up 50% or more upfront. So is no real debts in the first place, just billionare communist party developers 'building China.'
If the people can't pay they usually go to jail for 3.5 years where all kinds of extortion occurs payment for their moderate as apposed to extreme torture, they can also sell their kidneys and an eye or something like that to help pay if they have good ones.

Oh and it's 'illegal to listen to rumours,' so you can't even complaine to your friends or family about what is happening to you in China.

There is still lot's of busness being done there. This is one of the ways the Chinese Communist party is raising people out of poverty!

 

[CanOz]

They are not asleep they are still suckering in the population with the fake media commentary on real estate investment bonanza, and forcing the less able communities like the farmers off their traditional farm land by force selling their land and making them buy apartments with the money.

It usually leaves the ex-farmers and their children enslaved to paying off the rest of the apartment for the rest of their lives.

With no means of making money the family, including the children are used in slave labour and daughters of 10 or older get forced into prostitution if they are good looking enough to pay off the family debts because they have no other way of making money without their land. Often the family is tricked into signing the mortgage thinking there will be no more to pay. They are then intimidated into thinking it was their fault and if they dare speak up they will be sent of to reeducation slave labour camps to pay off their debts. The community will be told they are bad people not paying their debts.

Generally the collateral up front pays off the costs of the apartments so there is not too much debt in reality, as they have to cough up 50% or more upfront. So is no real debts in the first place, just billionare communist party developers 'building China.'
If the people can't pay they usually go to jail for 3.5 years where all kinds of extortion occurs payment for their moderate as apposed to extreme torture, they can also sell their kidneys and an eye or something like that to help pay if they have good ones.

Oh and it's 'illegal to listen to rumours,' so you can't even complaine to your friends or family about what is happening to you in China.

There is still lot's of busness being done there. This is one of the ways the Chinese Communist party is raising people out of poverty!

Notting, where did you get this information? Please provide links or people's names that were quoted. In my eight years in china I've not come across anything like this, even though I've lived in three cities in three different provinces....but perhaps I'm missing something??

CanOz