End of the China bull?

[Uncle Festivus]

Thought we'd slip this one through while everyone is on holidays

BEIJING (AP) ”” China increased interest rates Saturday for the second time in little more than two months as the government steps up its fight against rising inflation that could threaten political stability.
Those worries about inflation in the world's second-biggest economy meant the move by The People's Bank of China had been expected by the end of the year or early next year.
Effective from Sunday, the benchmark 1-year lending rate will climb 25 basis points to 5.81 percent, while the 1-year deposit rate will go up the same amount to 2.75 percent, the central bank said on its website.

Story

China's real interest rates are deep in negative territory. The one-year benchmark deposit rate is only 2.75 percent after the latest climb, well below November's inflation of 5.1 percent, highlighting the risk that price expectations may spin out of control.

 

[Aussiejeff]

Thought we'd slip this one through while everyone is on holidays



Story


View attachment 40514

LOL.

Just posted in the "other" forum re: China raising IR's when I stumble across this'n. Good one, Unc.

Yeah, I doubt holding your yuan in a fixed deposit at those minimal rates would too attractive when inflation is popping over 5%! Better for Chinese to invest it all in the twin bubbling brews of stocks or RE?

 

[Uncle Festivus]

Even glorious comrades cannot avoid that endearing feature of developed capitalism - gridlock. So now only the rich & corrupt elite will be able to buy a new car?

BEIJING””Beijing's municipal government Thursday unveiled sweeping measures to curtail the number of cars sold in the city next year, in a bid to ease traffic chaos that could prompt similar moves in other Chinese cities and deepen an expected slowdown for the auto industry.

Beijing will limit the issuance of new car and microvan license plates in the city to 240,000 in 2011, about one-third of this year's figure, and only registered Beijing residents will be able to obtain one. Cars that don't have Beijing license plates will be barred from entering the main city area during rush hour.
Yale Zhang, an independent auto analyst, said the measures were more stringent than the market had expected. "Auto makers may have to adjust their production and sales plans next year," he said.

http://online.wsj.com/article/SB10001424052748704278404576037223377494828.html

 

[Uncle Festivus]

Looks like China is facing a catch 22 with their little inflation problem. Raise rates and attract even more liquidity with which to fuel the bubbles or continue to let inflation sew the seeds of civil unrest? Whatever, the path forward is contractory for both their economy & the flow on effects for our commodities. The Shibor has just come back from a spurt higher but still remains at a high level.


Hard or soft landing after the end of the $600BILLION stimulis ended in November?

While the seven-day repo rate has dropped 320 basis points, or 3.20 percentage points, from a three-year high of 6.34 percent in three days, it may rebound before the five-day Lunar New Year holiday that starts Feb. 2, said Zhou Yan, a fixed- income analyst in Shanghai at Bank of Communications Ltd., the nation’s fifth-biggest lender.

http://www.bloomberg.com/news/2011-...since-lehman-to-curb-prices-china-credit.html

 

[tothemax6]

I don't follow what the Chinese officials game is.
How do they think that: having negative real rates TAMES inflation, raising rates AND pegging their currency to another which is not raising rates will not simply cause more inflation?
The Chinese boom has resulted from the countries economic movement to the right, which can't really go much further. Now they have a working economic system, and those 1.2billion people have had time to take advantage of it (which we call 'the boom'), they are going to face the problem every other economy with interfering governments and central banks face: normal booms and busts.

 

[Uncle Festivus]

Yes, they all eventually go down the same path ie keeping the people happy by trying to defer/eliminate the bust part of the cycle by stimulating with US dollars, which themselves have been created from thin air. So most of the China miracle is based on the expansion of the US money supply?

The Triffin Dilemma in full force?

 

[Sean K]

Anything that happens will surely just be a blip in the scheme of things.

A crash will mean nothing in the bigger picture.

China has decades to run.

Unless they have a civil war then it will be a bigger blip.

 

[Uncle Festivus]

Anything that happens will surely just be a blip in the scheme of things.

A crash will mean nothing in the bigger picture.

China has decades to run.

Unless they have a civil war then it will be a bigger blip.

I think that the scale of global indebtedness even just a 'blip' will be disastrous, especially when more and more people are coming around to the fact that China is essentially a state sanctioned Ponzi scheme, rather than the 'free market' moral hazard capitalism that we now have in 'developed' economies?

Global investors are bracing for the end of China’s relentless economic growth, with 45 percent saying they expect a financial crisis there within five years.

An additional 40 percent anticipate a Chinese crisis after 2016, according to a quarterly poll of 1,000 Bloomberg customers who are investors, traders or analysts. Only 7 percent are confident China will indefinitely escape turmoil.

Story

Rampant (monetary) inflation leads to higher commodity prices which leads to higher wages - spent on higher food prices....which leads to inflation.....

Just this week, the manufacturing-heavy province of Guangdong boosted its minimum wage by between 18 and 26 per cent, the second increase in less than a year. The city of Beijing also increased its minimum wage by 21 per cent this month.

While higher salaries for workers will help spur domestic demand and help rebalance China’s export-driven economy, a major short-term concern is that increased labour costs will harm China’s key manufacturing sector and drive production to cheaper regions such as Southeast Asia.

So the economists would exclaim 'so what, more money to buy things!' But getting an extra $10 a month to take home $200 a month isn't going to lead to a splurge in flat screen TV's, but it has a disastrous effect on the already paper thin profit margins, if they actually make a profit as government subsidies via the banking system continue to prop up dodgy industries.

 

[sinner]

Anything that happens will surely just be a blip in the scheme of things.

A crash will mean nothing in the bigger picture.

China has decades to run.

Unless they have a civil war then it will be a bigger blip.

Please explain.

How will China kick-start domestic consumption demand, which is the base premise for your "decades" comment. The numbers for China really don't look that amazing unless you are using the same fallacious model which claimed Japan would take economy supremacy in the 80s.

Otherwise, China is only running as far as their exhausted European and American export markets can take them and it will take decades just to kick-start that demand.

More likely at this point is all that supposed "growth" in the form of US and European companies using China as a cheap labour zone will follow a slow down-trend as the next, cheaper country starts taking chunks of their market.

 

[Toothpic44]

Anything that happens will surely just be a blip in the scheme of things.

A crash will mean nothing in the bigger picture.

China has decades to run.

Unless they have a civil war then it will be a bigger blip.

China doesn't have decades to run. Japan exhibited signs of growth much like this during their "miracle" days, and China seems to be an ever worse situation than they were. Here's an article on it:

https://austocks.wordpress.com/2011/01/28/a-bear-in-china/

I will admit that China definitely cannot be ignored any longer, but all those bulls who are tossing money in China just because they believe China will be the next US are going to be in for a shock.

 

[So_Cynical]

China doesn't have decades to run. Japan exhibited signs of growth much like this during their "miracle" days, and China seems to be an ever worse situation than they were. Here's an article on it:

https://austocks.wordpress.com/2011/01/28/a-bear-in-china/

I will admit that China definitely cannot be ignored any longer, but all those bulls who are tossing money in China just because they believe China will be the next US are going to be in for a shock.

Interesting that the video in your link was posted on 25 January 2010 so more than 12 months later and the China bubble still rolling along.

 

[Toothpic44]

Interesting that the video in your link was posted on 25 January 2010 so more than 12 months later and the China bubble still rolling along.

I don't want to start a "China: Bull or Bear" argument, but there is no telling exactly when China will crash, if it does happen. It could happen in a week, a year, or most likely a few years; but the arguments on the article still apply today. Oh, and the video, if you need a newer video link, then here you go:
http://www.youtube.com/watch?v=bP6HQbGuWf8

And here is a much deeper article on the subject:
http://finance.fortune.cnn.com/2010/11/17/chanos-vs-china/

There are certainly those, like you, who believe China is here to stay. They definitely are, but they aren't going to charm the world with double-digit growth rates every year. I mean, their population is shrinking with their strict one-child policy. This has to be the biggest smack on the face - how can the Chinese economy continue to grow at rates like today when their population is decreasing at a rate where every two people can reproduce one child. Remember, China is also reliant on cheap labour, and the reason that labour is so cheap is because there are so many Chinese.

Thank you, though, So_Synical, for presenting your opinion in a reasonable fashion. It just happens to be that the argument on China only seems to have two kinds of opinions: the bulls and the bears, and nothing in between. Only time will tell who is on the right side of the debate.

 

[So_Cynical]

There are certainly those, like you, who believe China is here to stay. They definitely are, but they aren't going to charm the world with double-digit growth rates every year. I mean, their population is shrinking with their strict one-child policy. This has to be the biggest smack on the face - how can the Chinese economy continue to grow at rates like today when their population is decreasing at a rate where every two people can reproduce one child. Remember, China is also reliant on cheap labour, and the reason that labour is so cheap is because there are so many Chinese.

Thank you, though, So_Synical, for presenting your opinion in a reasonable fashion. It just happens to be that the argument on China only seems to have two kinds of opinions: the bulls and the bears, and nothing in between. Only time will tell who is on the right side of the debate.

Now i never did say that i thought the Chinese bubble was here to stay....ive posted on a few occasions that the China bubble will eventually burst, however i see it more from a political stand point, that the Chinese communist Govt must eventually fall and they will not go willingly like the Russians did....potential for massive political and thus economical upheaval in China is almost 100% certain.

The current China bubble is just a little one and of not much consequence in my opinion...after all China is just the C in BRIC India will over take China in population growth in a few years time...BRIC demand will continue, and will grow, the resources super cycle has at least a decade to run.

 

[warakawa]

As a Chinese, I can not help but laugh at the amount of crap I read here on this thread, full of opinions and speculations and few facts to back them up.

"potential for massive political upheaval in China is almost 100% certain"?

 

[So_Cynical]

As a Chinese, I can not help but laugh at the amount of crap I read here on this thread, full of opinions and speculations and few facts to back them up.

"potential for massive political upheaval in China is almost 100% certain"?

Ok ill bite

Are you suggesting that the Chinese communist party will stay in power for ever and ever...continuing political oppression, freedom of speech etc? or allow the formation of other political party's and hand over power after a free and fair election?

Perhaps you think the communists would win a free and fair election?

Please share your unique Chinese insights into Chinese politics under 1 party rule.

 

[warakawa]

Ok ill bite

Are you suggesting that the Chinese communist party will stay in power for ever and ever...continuing political oppression, freedom of speech etc? or allow the formation of other political party's and hand over power after a free and fair election?

Perhaps you think the communists would win a free and fair election?

Please share your unique Chinese insights into Chinese politics under 1 party rule.

Perhaps you should read more into Chinese and Asian political situation in general before make ridiculous assumptions about a future event.

Perhaps are you suggesting our Australian style pseudo-democracy will be forever be our political model and never change?

of course no political/economic model last forever, economic and political direction changes with changes in leadership however, your assumption of "massive political and economical upheaval with almost 100% certainty" is simply without evidence and to from my Chinese perspective, just ridiculous. Don't worry, we (Overseas Chinese people) are so used to your (you white people) self-righteousness and absolute unrealistic emphasis of your value of democracy upon the Chinese civilization.

Just because a nation have single party rule does not equate to "massive upheaval", perhaps you should study history of Taiwan, South Korea and Singapore? How these Asian nations (except Taiwan which in part of China) were able to change from a dictatorship to liberal democracy without violent revolution. The transition from authoritarian to democracy need not to be a revolution or in a haste. Perhaps Chinese leadership already have political reform plan in mind? Perhaps you should stop believe in typically Australia and Western propaganda?

And in the mean time, please preach your "democracy, freedom and other bull****" somewhere else, authoritarian capitalism is here to stay in China and I as a Chinese Australian living in a democracy, with access to freedom of information, fully support the Chinese Communist Party's rule and control of the Chinese nation. They have done a wonderful job.

 

[So_Cynical]

Perhaps you should read more into Chinese and Asian political situation in general before make ridiculous assumptions about a future event.

I really don't think its an "out there" assumption to think that the Chinese communist party will not hand over power to any other party...unless its some sort of stage managed hand over like the US managed in South Korea back in the 60's and 70's

The Tiananmen Square massacre showed the depths of depravity that the the Party is prepared to go to when threatened...and i see no reason why they wouldn't go down that road again.

Perhaps are you suggesting our Australian style pseudo-democracy will be forever be our political model and never change?

Cant see it changing ever...realisticly a constitutional amendment would need to be passed by referendum and Aust don't have much of a record of success in that department.

of course no political/economic model last forever, economic and political direction changes with changes in leadership however, your assumption of "massive political and economical upheaval with almost 100% certainty" is simply without evidence and to from my Chinese perspective, just ridiculous.

As demonstrated by your post...your Chinese perspective is seriously tainted by decades of propaganda, censorship and a politicly skewed education...not to mention the ever present reality of wishing to avoid a little trip to a re-education facility etc.

Don't worry, we (Overseas Chinese people) are so used to your (you white people) self-righteousness and absolute unrealistic emphasis of your value of democracy upon the Chinese civilization.

Just because a nation have single party rule does not equate to "massive upheaval", perhaps you should study history of Taiwan, South Korea and Singapore? How these Asian nations (except Taiwan which in part of China) were able to change from a dictatorship to liberal democracy without violent revolution. The transition from authoritarian to democracy need not to be a revolution or in a haste. Perhaps Chinese leadership already have political reform plan in mind? Perhaps you should stop believe in typically Australia and Western propaganda?

• Taiwan is an independent state and will never be part of a communist China...ever!
• South Korea had an American managed transition to a more politicly acceptable (to the US) form of democracy.
• Singapore was asked to leave the Malaysian federation...because the Malay's didn't want to be dominated by Chinese...this after the British handed over power.

I cant see any easy out for China...the Army is so aligned to the Party, Business, every part of successful China owes the party...there are to many people with to much to loose, that's why it will be a violent revolution.

And in the mean time, please preach your "democracy, freedom and other bull****" somewhere else, authoritarian capitalism is here to stay in China and I as a Chinese Australian living in a democracy, with access to freedom of information, fully support the Chinese Communist Party's rule and control of the Chinese nation. They have done a wonderful job.

I noticed this hard core, 1 party, communist support from Aussie Chinese during the Olympics...and am still a little bemused by it, perhaps its another sign of Multiculturalism not working that well...perhaps its the pull of home and all you have ever known etc, perhaps its the human need to just belong to something bigger than you, and the devil you know being better than the devil you don't know. :dunno:

Anyway im certain the majority of Uyghur people and the people of Tibet and Taiwan don't share your sentiments.

 

[warakawa]

anyways, we have our differences and opinions. However we all hope that China does not go bear, it's not in Australia's best interest.

 

[wayneL]

And in the mean time, please preach your "democracy, freedom and other bull****" somewhere else, authoritarian capitalism is here to stay in China and I as a Chinese Australian living in a democracy, with access to freedom of information, fully support the Chinese Communist Party's rule and control of the Chinese nation. They have done a wonderful job.

I agree. SC should find a forum where the majority are democracy and freedom (and other "BS") loving folk. Perhaps one that allows freedom of speech, perhaps hosted in Australia or some other western democracy.

Maybe something like an Australian Stock Forum?

 

[tothemax6]

As a Chinese, I can not help but laugh at the amount of crap I read here on this thread, full of opinions and speculations and few facts to back them up.

"potential for massive political upheaval in China is almost 100% certain"?

Btw, if you are a Chinese, why are you using a Japanese-sounding name?

anyways, we have our differences and opinions. However we all hope that China does not go bear, it's not in Australia's best interest.

I'm pretty sure its going to have a crash mate. It just looks to much like a credit induced construction/housing speculation boom at the moment. They have the negative real interest rates and everything.