From CNBC: China GDP Likely Grew by 13% in December: O'Neill
"One is the issue of inflation. China releases its monthly inflation data before the end of the month, and that does raise a bit of skepticism there," he said, pointing out also that although the country reports car sales rises in the double digits, gasoline sales increase by only 2 to 3 percent. Hey buddy, haven't you heard that cars are getting more and more efficient these days. Did you fail to consider the possibility of 2 million Prius's being sold to the Chinese??? Huh!
O'Neill said fears of asset bubbles in China because of the country's rapid growth and lax fiscal and monetary conditions are "completely overblown." He also pointed out that the Chinese stock market has not made a new high since August. I'm at a loss as to how anyone can fail to consider the potential for a real estate asset bubble in China. Maybe I'm just paranoid…
The Tiananmen Square protests of 1989, referred to in most of the world as the Tiananmen Square massacre and in the People's Republic of China (PRC) as the June Fourth Incident (officially to avoid confusion with two prior Tiananmen Square protests), were a series of demonstrations in and near Tiananmen Square in Beijing in the PRC beginning on 14 April 1989. Led mainly by students and intellectuals, the protests occurred in a year that saw the collapse of a number of communist governments around the world.
The protests were sparked by the death of a pro-democracy and anti-corruption official, Hu Yaobang, whom protesters wanted to mourn. By the eve of Hu's funeral, 100,000 people had gathered at Tiananmen square.[1] The protests lacked a unified cause or leadership; participants included disillusioned Communist Party of China members and Trotskyists as well as free market reformers, who were generally against the government's authoritarianism and voiced calls for economic change[2][3] and democratic reform[3] within the structure of the government. The demonstrations centered on Tiananmen Square, in Beijing, but large-scale protests also occurred in cities throughout China, including Shanghai, which remained peaceful throughout the protests.
The movement lasted seven weeks, from Hu's death on 15 April until tanks cleared Tiananmen Square on 4 June. In Beijing, the resulting military response to the protesters by the PRC government left many civilians and military personnel charged with clearing the square of the dead or severely injured. The number of deaths is not known and many different estimates exist.[4][5] [Very much like China's economic data -Reggie]
Following the conflict, the government conducted widespread arrests of protesters and their supporters, cracked down on other protests around China, banned the foreign press from the country and strictly controlled coverage of the events in the PRC press. Members of the Party who had publicly sympathized with the protesters were purged, with several high-ranking members placed under house arrest, such as General Secretary Zhao Ziyang. There was widespread international condemnation of the PRC government's use of force against the protesters.[3]
Tags: Asia, Asset Securitization Crisis, Global Macro, Legislation, Law & the Government
The more I read about China the scarier it becomes to me. If/when that country should implode it will make subprime look like a tea party
have you looked at MTG or any of the private mortgage insurance companies (RDN, PMI, etc) Reggie? they just look so screwed it’s hard to imagine most of them surviving the next few years…..
I was short Radian and several of its peers in ‘07 and early ‘08. Many of them are done. Look at the losses coming out of Fannie and Feddies guaranty business, not to mention FGIC, ABK and MBIA.
I am shocked how few people are open to the fact that China is experiencing a massive bubble. Even Marc Faber doesn’t seem to see it. There are so many people who are right about so many things but miss china. I have seen articles talking about 50% home price appreciation. I have seen articles pointing out 40% of Chinese people own over 70% of the real estate, and 10% own about half.
I used to have a lot of respect because I thought the Chinese government was a lot more financially further than the US government. Now, I see that isn’t the case. Like the US, they are just as willing to do everything they can to avoid the pain of a recession. Once again failing to realize “recessions are not the problem, they are merely a symptom of the problem.”
Beijing proclaims itself to be a life jacket in the phase of the worldwide economic crisis. And so it is believed, that China will be the redeemer of the global economy and will prove to be an engine to propel the world further. Hold on for a second! If the engine has a “Made in China” tag on it, I’d definitely have second thoughts on its claims…
Since the US-induced sub-prime mortgage crisis hammered the world economy to crumbles all leading economists have been making brouhaha of five factors that can hinder the recovery of the world economy: Bad assets, poor banking regulations, mass unemployment, continued imbalances in the global economy, and unpredictable variables like those of H1N1. Unfortunately for China, it has an exposure to all of these and still worse – it is one of the factors contributing to the imbalance.
Like US, unemployment in China too is a cause for grave concern and a brainteaser of sorts. The 300 million that are unemployed constitutes 30% of the labor-age population in China.
Again, China’s domestic demand has been consistently weakening in the past few years and more so since 2009, when real estate prices were stimulated by Beijing. Their buying power is almost solely focused on the housing market, with China’s final domestic consumption rate falling to a historic low. Its private consumption rate (Private consumption / GDP) in 2008 was 35.5% – well lower than the 70.1% of that existed in U.S. during the Great Depression. Not only that, but was even lower than that of India’s 54.7%. From 1978 to 2005, China’s average consumption rate was 58.5%, lower than the global average consumption rate of 76% during the same period.
According to the National Bureau of China, economic growth in the first three quarters of 2009 reached about 7.7%, of which only 4.0% was attributed to consumption and 7.3% to investment – exports offered a negative contribution to the Chinese economy’s growth.
Economic balance has also been tainted by the economic relationship between China and the US. Americans, it seems have begun changing their habit of low savings and high consumption, which is gradually resulting in a reduction in the U.S. loan from China. As of mid-December 2009, the third-quarter Federal Reserve “cash flow” data shows that the US household savings rate continued to rise, stabilizing at about 5% toppling China as the main buyer of government bonds, and the incremental proportion of foreign investment in U.S. Treasury bonds dropped from 54% in 2008, to 27% in the third quarter of 2009. Thought this looks like good news for us, it definitely doesn’t for China… ;D
The thing about China is that it is not a free economy and this affects everything. There are many people who have made a ton of money over the past decade manufacturing whatever crap the US wants to buy. They have no place to put their money so they buy property. Paying cash. I live in China and have for some time seen this. People will often buy an entire floor of a new building. It serves as a store of wealth more than speculative gamble. The Chinese are gamblers but they also save a ton of money and think about wealth preservation/legacy. They can’t put money in the banks because it raises concerns about taxes. They can’t invest it in the stock market for the same reasons plus it is too risky. They can’t move it to the US or Hong Kong because of capital controls, so there really is nothing else for them to do other than build warehouses to store money.
Not saying there aren’t bubbles here or property value isn’t rising too high but it is not like the US subprime at all. Most people pay cash. For those not paying cash, banks here require 30% down.
Loans in China are massive, bloomberg below
Lending Boom
Qu estimates new loans will be limited to 7 trillion yuan ($1 trillion) in 2010. Banks including Industrial & Commercial Bank of China Ltd., the world’s biggest by market value, extended an unprecedented 9.21 trillion yuan of loans in the first 11 months of 2009, compared with 4.15 trillion yuan a year earlier. Lending was biggest in the first half of 2009.
Premier Wen Jiabao said Dec. 27 that it would be better if lending weren’t on such a large scale. He also said that China should anticipate inflation because of factors including rising global commodity costs, pledging to limit price increases.
The China Banking Regulatory Commission’s recommended range for lending this year is between 7 trillion yuan and 8 trillion yuan, a person familiar with the matter said last month. Banks should guard against risks including overly-rapid credit growth, the People’s Bank of China said yesterday.