Tweet me!Standing near his 12-table noodle shop on Beijing’s Yonghegong Avenue, owner Liu Heliang says meat and vegetable prices have climbed 10 percent in a year and staff wages are up 40 percent.
“I’m struggling to make ends meet with costs going up like this,” said Liu, a native of Sichuan province who pays his workers as much as 1,800 yuan ($271) a month, or 88 percent more than the Beijing minimum wage, to serve up a staple Chinese meal. “Raising prices is the only way out,” he said, predicting he won’t be able to hold out beyond two months.
Premier Wen Jiabao’s cabinet last week announced it will sell grain, cooking-oil and sugar reserves, ordered an end to tolls on trucks carrying produce and threatened price controls to rein in a 10 percent inflation rate for food. Because the measures would do nothing to counter the 54 percent surge in money supply over the past two years, the risk is they will prove insufficient to cope with the challenge.
“They are just not addressing the fundamental problem at all,” said Patrick Chovanec, an associate professor at Beijing’s Tsinghua University. With the expansion of credit and cash in the economy stemming from China’s response to the global crisis, “you’re sitting on a volcano,” said Chovanec.
Now, it didn't take a genius to figure out this would happen. As a matter of fact a slight dose of common sense (when was the last time you got something for nothing, really?), a little historical perspective or a BoomBustBlog subscription would have sufficed.
BoomBustBlog China Focus: Inflation? Thursday, May 20th, 2010
Can China Control the “Side-Effects” of its Stimulus-Led Growth? Let’s Look at the Facts Wednesday, February 3rd, 2010
What Are the Odds That China Will Follow 1920’s US and 1980’s Japan? Wednesday, March 10th, 2010
BoomBustBlog China Focus: Interest Rates Thursday, May 20th, 2010
My China Ruminations Have Come to Pass As the Country Enters a Bear Market Tuesday, May 11th, 2010
From Bloomberg: China Inflation Accelerates as Loans Surge, Property Prices Rise by Record
May 11 (Bloomberg) — China’s inflation accelerated, bank lending exceeded estimates and property prices jumped by a record, increasing pressure on the government to raise interest rates and let the currency appreciate.
Consumer prices rose 2.8 percent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 percent, the statistics bureau said in statements today. New lending of 774 billion yuan ($113 billion), announced by the central bank, was more than any of 24 economists forecast.
Chubble (The Unmistakeable, Yet Thoroughly Argued Chinese Bubble), Unemployed/Deleveraging Shopaholics Pushing Retail Stocks & Other News Thursday, April 15th, 2010
Now That the MSM and Chinese Officials Admit There Is a Bubble In China…Tuesday, July 20th, 2010
Will the Emerging Markets Lead the World to New Growth? Wednesday, July 7th, 2010, Excerpts from the HSBC forensic analysis featured in this post:
Below are the full forensic reports available for download to subscribers (click here to subscribe):
HSBC 170610 Professional & Institutional (554.65 kB 2010-07-07 06:23:52)
HSBC 170610 Retail (388.56 kB 2010-07-07 06:22:25)
We have performed a decent amount of analysis on HSBC in the past as well, and it has served as a very profitable short position in 2008. I have decided to release the dated analysis to the public for free, it is available by clicking here: HSBC_Holdings_Report_04August2008 – pro (138.89 kB 2008-11-06 10:11:09)
For anyone interested in the myriad risks and opportunities abound in the HSBC market’s macro environment, I strongly suggest you review our sovereign contagion models (subscribers only):
Sovereign Contagion Model – Pro & Institutional (1003.48 kB 2010-05-04 12:30:48)
Sovereign Contagion Model – Retail (961.43 kB 2010-05-04 12:32:46)
And as China goes, Australia will most likely follow...
Aussi Bubble Video to Go With You Aussie Bubble Speculation? Saturday, June 12th, 2010
In Australia, Tax as a Contagion
Australia: The Land Down Under(water in mortgage debt)
As an extension of the Chinese macroeconomic discussion at BoomBustBlog throughout 2010, there may be an “Asian Contagion” spreading as a result of a Chinese investment slowdown. Those at risk are the countries and regions that have supplied China with the commodities necessary to build empty cities. While the (comparatively, in terms of GDP) enormous Chinese stimulus package from the first part of the financial meltdown in 2008 has generated incredible growth in GDP and asset prices, the game appears to be over for flipping 1000 square foot apartments in Shanghai. After the direct hit taken to China, the picture looks very grim for Australia, where a bursting Chinese housing bubble could drive industrial commodities lower, sparking higher unemployment in one of the nation’s largest sectors, and in turn pop their domestic housing and property bubble. In the near to medium term, Australia is showing some major red flags.
