Thanks for the replies. Just like to repond.
Your view of China is very simple... wait till March and the new five year plan, the rumors are that it contains some surprises for those that think China is export dependent.
Look, China is still very very export dependent. When exports plummeted due to the GFC, China pumped money into construction of housing. It keeps people employed building empty cities. This is exactly the problem the US and Europe had. They lost their exporting ability to cheaper China, so instead they created a credit bubble which created a housing bubble. It worked great for a decade. House prices rose. People felt richer. But then it stopped working.
China is pumping money into housing because it keeps the peasants busy. It holds the day of reckoning off until the global economy recovers or their internal demand rises to compensate. But that is much harder than it sounds.
I'm no expert but some simple maths might help to explain my point. The average wage in China is something like $3,000 per year. Times that by 1.2 billion Chinese and you get a market of $3.6 trillion.
Now the average wage in USA is something like $45,000. Times that by 300 million Americans and you get a market of $13.5 trillion.
So the idea that you can replace a market of $13.5 trillion with a much smaller market of only $3.6 trillion without problems doesn't make sense. The European market is probably worth another $13.5 trillion and they're having problems too.
If the US and Europe's economies drop say 10% over the next couple of years, that is a loss of say $2.7 trillion dollars. The Chinese market would have to grow 75% over the next couple of years to make up for it. I think China's growing at something like 10% per year, which doesn't make up for the potential shortfall. Might come up 65% short.
The best quote I ever read about China and the other emerging economies was that around 4.5 billion people on the planet have a great plan to get rich, selling stuff to 1.5 billion people in the advanced Western economies. Hmm.
And they're going to have to do it with dwindling fossil fuels and scarcer resources. Hmm.
I love this stat... 95% of Chinas billionaires have made it on the local market... no export! They have internal momentum and a billion people... this is not a bubble, it is very different in the detail to what has gone on here and in the western world. Sure they will have up and downs but to suggest it will pop in a bubble type dynamic is missing the point of what is happening across Asia.
I found this stat hilarious and I don't doubt it. But it is pointless. Look, lots of property developers in the US became billionaires by simply developing property. Wow! No export! Before their housing bubble popped, they had lots of internal momentum too.
Look, if you're Chinese and want to become a billionaire it is simple. Go borrow ten billion from the bank, build a bunch of apartments and sell them for 10% profit. Hey, presto, instant billionaire. The local governments there would be happy to facilitate you, even if it means demolishing a bunch of peasants' farms. But how has the economy improved?
And finally (sorry, I can ramble), I get really scared when anyone says that this time it is different. Particularly when they use it to explain why it isn't a bubble.
It's not a bubble cos this time it's different. Hmm. Yeah. Right. It's not really a strategy I'd be banking on. Gambling on, maybe.