End of the China bull?

[So_Cynical]

"40% of the world's population has a great plan to get rich by selling stuff to 14% of the world's population," Napier observed. "That can work for several years, and it has - particularly if 14% of the world's population is prepared to gear like crazy to buy all of this stuff."

Not sure where I read this, but it's food for thought.

I think it can go on for a long time yet as its not just the Americans buying Chinas exports...its the whole world, so the 14% figure should prob be 21% and then there the massive differences in net worth and income.

So its more like 40% of the world's population (who are mostly very poor and have nothing) getting richer selling stuff to 21% of the world's population (who have a net worth and income prob 20x the average Chinese person)
& credit cards.

 

[Dowdy]

If the China bull ends, commodity prices aren't the only things that will suffer.

Australian property with suffer too. All these big Chinese companies who bought Aussie property as a place to invest their money will have to liquidate their assets which means a mass selling of Aussie property

 

[Trembling Hand]

If the China bull ends, commodity prices aren't the only things that will suffer.

Australian property with suffer too. All these big Chinese companies who bought Aussie property as a place to invest their money will have to liquidate their assets which means a mass selling of Aussie property

What exactly do you mean by this? When has a big Chinese company been interested in Australian property?

Unless it had valuable rocks under it?

 

[Dowdy]

What exactly do you mean by this? When has a big Chinese company been interested in Australian property?

Unless it had valuable rocks under it?

Claims made by various people including real estate agents that Chinese are coming here buying property, paying them in cash and leaving them empty hoping for capital gain.

I highly doubt those Chinese are private individual buyers.


We do the same - Australian companies buy property overseas as a form of investment.

 

[Trembling Hand]

I highly doubt those Chinese are private individual buyers.

Why? there are more millionaires in China than anywhere.

I don't think a "big Chinese company" would have the slightest interest in a residential property.

 

[Dowdy]

Why? there are more millionaires in China than anywhere.

True, but the result would be the same if the China bull ends. It just won't be a mass selling.

I don't think a "big Chinese company" would have the slightest interest in a residential property.

Why? Aussie companies do the same (only with commercial property) but we're a bit smarter about it, since they actually try to put tenants in them

 

[So_Cynical]

Why? there are more millionaires in China than anywhere.

I don't think a "big Chinese company" would have the slightest interest in a residential property.

The Chinese Govt actually owned (perhaps they still do?) a few of the bigger Chinese restaurants....least that what i read somewhere back in the early 90's

 

[Uncle Festivus]

Bubble, bubble toil and TROUBLE!

Last year, total fixed-asset investment accounted for more than 90% of China's overall growth; residential and commercial real estate investment comprised nearly a quarter of that. Toss in the not insignificant fact that it was a huge real estate bust in the U.S. that dumped the world into recession in the first place, and many analysts are now beginning to fear the worst. "China's property market," says independent Shanghai economist Andy Xie, "is a massive bubble."

http://www.time.com/time/magazine/article/0,9171,1971284,00.html#ixzz0kreNQ2sG

China has become a field of dreams; a build-and-they-will-come economy.

http://www.smh.com.au/business/the-china-bubble-20100412-s34b.html

http://www.smartcompany.com.au/economy/20100406-is-china-a-classic-bubble-economy-maley.html

 

[Aussiejeff]

From Bloomberg today.. http://noir.bloomberg.com/apps/news?pid=20601087&sid=aB_mY.uI0NfQ&pos=1

June 29 (Bloomberg) -- Asian stocks dropped to a two-week low on concerns that growth in China, the engine of the world’s economic recovery, will slow.

Investor sentiment worsened after the Conference Board said its China leading economic index rose 0.3 percent in April, less than the 1.7 percent gain reported June 15. China’s exports face “strong headwinds” in the second half of the year from policy tightening measures and the European debt crisis, Citigroup Inc. said in a report today.

“There’s no catalyst for stocks to go up,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “I don’t see the possibility of a reversal until the government eases its current tightening measures.”

The New York-based Conference Board cited a calculation error for the revision in its Chinese index. The research group’s outlook for the nation’s economy hasn’t been affected by the correction, said William Adams, the group’s economist.

“Growth was not likely to accelerate in China, and in fact, a moderation is possible,” Adams said in a telephone interview. “This correction also supports he same view.”

 

[drsmith]

Some interesting commentary from Lateline business on China's economy (China confused by super profits tax).

http://www.abc.net.au/lateline/business/

 

[drfuzzy]

....and more inflation.....

The Reserve Bank thought it had a problem

"fast growth in money supply" - I thought that was a capitalist tradition, looks like the commo's have stolen that as well


The chart - support holding - for now?

Interesting chart. I personally feel the China story is too big and too bullish to pop like the tech bubble did almost a decade ago. A billion Chinese people are moving towards a better quality of life and urbanizing. The demand for a better quality of life is too great to see China falter now.

 

[baby_swallow]

Claims made by various people including real estate agents that Chinese are coming here buying property, paying them in cash and leaving them empty hoping for capital gain.

I highly doubt those Chinese are private individual buyers.


We do the same - Australian companies buy property overseas as a form of investment.

The Chinese (ie.The Govt) been divesting their US dollars into global companies - mining, food, real estates, and yes - including residentials by way of proxies. They are the worlds largest holder of USA debts. They fear that one day the US dollar will tank.

 

[Garpal Gumnut]

I must admit some bias, in that I only read the WSJ for information on China, I find it the most comprehensive.

I have never visited mainland China.

It appears to me that it is a complex centrally controlled economy, with ambitious leaders, and a so far compliant population with great differentials in wealth.

As long as the cadres can keep control China will continue to steal assets in the way of patents on machinery, IT and infrastructure, until it becomes the dominant world economy.

Who knows whether the bull has ended.

Ask the Central Committee, after the next meeting.

gg

 

[drsmith]

Not from the WSJ but still interesting.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10656976

 

[sinner]

Not from the WSJ but still interesting.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10656976

There was a foreign correspondent episode on ABC iView (unfortunately no longer online) about the China property bubble. It interviewed Michael Pettis heavily and that Inner Mongolian bubbletown was also visited.

Eery place.

I think the fact that nobody seems to care about lines like this

The nation's 13.6 trillion yuan of new loans in the past 17 months, bigger than the economies of South Korea, Taiwan and Hong Kong combined, is "unprecedented in 400 years of economic history," said London-based hedge fund manager Hugh Hendry, co-founder of Eclectica Asset Management.

shows huge complacency in the market. 13.6 trillion yuan, if anyone was curious, also roughly equals to the amount of USD held by the Chinese (2 trillion) as reserves. The PBoC has painted themselves into a corner on this one it seems, they told the banks to lend and lend they did now they told the banks to stop lending and stop they did except how can you cut 30% of lending that is bigger than your neighbouring countries economies combined without some sort of fiscal impact!

If it pops it will be another one that "nobody could have seen coming" or a "six sigma event" whatever people like to claim when they are ignoring the reality of the situation.

 

[Uncle Festivus]

Just seems to me like they are making the same mistakes that the rest of the world has made with regards to paper IOU's - overproduction. China could be the next catalyst for GFC II, only the rest of the world will be starting this one from a base far worse than GFC I. Ah well, back to the bunker.....

 

[sinner]

More on Chinese ghost towns:
http://blogs.worldbank.org/transport/node/526

(from the perspective of a World Bank transport analyst)

The landscape is characterized by long, 450-meter blocks, gated communities with limited access points, expansive intersections that may be challenging to cross on foot, and a segregation of uses that may require residents to travel great distances to work, buy rice, and to go out for romantic dinners – and compete with other residents for road-space, since the mega-block urban design requires everyone to funnel into the exact same roads. My gut tells me this is a worrisome pattern -- though, I haven't seen traffic forecasts or density plans, so I cannot say for certain what will come to be.

 

[Timmy]

More on Chinese ghost towns:
http://blogs.worldbank.org/transport/node/526

I suppose a town is a physical "network effect" in action:

In economics and business, a network effect (also called network externality) is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service increases as more people use it. http://en.wikipedia.org/wiki/Network_effect

So, given towns such as these are

satellite towns far from the urban core
http://blogs.worldbank.org/transport/node/526 (the same report sinner is quoting from)

it is really not too surprising they are slow to populate.

Also:

in all likelihood, after the light rail lines are completed, it will not be long before Chenggong bursts into life
http://blogs.worldbank.org/transport/node/526 (the same report sinner is quoting from)

 

[sinner]

I suppose a town is a physical "network effect" in action:


So, given towns such as these are it is really not too surprising they are slow to populate.

Also:

Hi Timmy, I agree with the premise of network effect but you can see in the article it states that usually they get Government facilities to move in first which spurs demand but in this case the Government workers would prefer to commute rather than move (anecdotal quote from the article).

Kangbashi is an example of a town where network effect did not materialise even after three years. Their train lines are already completed I believe. Government workers prefer to commute rather than move, there, too.

In any case, I didn't post the article to make a bearish point or anything, just to increase coverage on the topic, especially since I had not heard about Chenggong, I thought others might be interested in the phenomena.

 

[Timmy]

Tks sinner - was an interesting article. Must admit I don't know much about urban development in China (or enough about China at all) - found this series of articles useful though:

The Nine Nations of China
http://chovanec.wordpress.com/2009/11/16/the-nine-nations-of-china/

China often seems like a monolith of 1.3 billion people, but it's not. It's a mosaic of distinct regions, and understanding those regions is vital to understanding China. This article presents a framework for how to think about those regions, what they're like, and why they matter. It's the product of over 20 years of business travel and personal exploration that covered every one of China's 31 provinces, plus Taiwan. And it's just the tip of the iceberg ”” I hope to expand on this framework and explore it further in various venues, including this blog, in the weeks and months ahead.