China is Dubai times 1,000 — or worse

[Arraya]

As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.
“Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.” He is planning a speech later this month at the University of Oxford to drive home his point….
Mr. Chanos declined to be interviewed, citing his continuing research on China. But he has already been spreading the view that the China miracle is blinding investors to the risk that the country is producing far too much.
“The Chinese,” he warned in an interview in November with Politico.com, “are in danger of producing huge quantities of goods and products that they will be unable to sell.”

[briansd1]

Good article.

I do agree that China due for a bubble burst. When will that happen? Hard to predict.

Sure the bubble (or many small bubbles) will burst, but China will pickup and get over it, just like America did when we were growing during industrial revolution to the 1950s.

Remember, that China has a great number of consumers yearning to spend and buy things.

To me, the great challenge for China is income equity. They need to put money into the hands of the middle and lower classes so that they can grow their markets.

The central government top levels of leadership is very competent. The problem in China is the local and provincial level where corruption is endemic. The local leadership oftentimes consists of uneducated former peasant/laborers who run their fiefs like mafia bosses.

[briansd1]

Good article.

I do agree that China due for a bubble burst. When will that happen? Hard to predict.

Sure the bubble (or many small bubbles) will burst, but China will pickup and get over it, just like America did when we were growing during industrial revolution to the 1950s.

Remember, that China has a great number of consumers yearning to spend and buy things.

To me, the great challenge for China is income equity. They need to put money into the hands of the middle and lower classes so that they can grow their markets.

The central government top levels of leadership is very competent. The problem in China is the local and provincial level where corruption is endemic. The local leadership oftentimes consists of uneducated former peasant/laborers who run their fiefs like mafia bosses.

[briansd1]

Good article.

I do agree that China due for a bubble burst. When will that happen? Hard to predict.

Sure the bubble (or many small bubbles) will burst, but China will pickup and get over it, just like America did when we were growing during industrial revolution to the 1950s.

Remember, that China has a great number of consumers yearning to spend and buy things.

To me, the great challenge for China is income equity. They need to put money into the hands of the middle and lower classes so that they can grow their markets.

The central government top levels of leadership is very competent. The problem in China is the local and provincial level where corruption is endemic. The local leadership oftentimes consists of uneducated former peasant/laborers who run their fiefs like mafia bosses.

[briansd1]

Good article.

I do agree that China due for a bubble burst. When will that happen? Hard to predict.

Sure the bubble (or many small bubbles) will burst, but China will pickup and get over it, just like America did when we were growing during industrial revolution to the 1950s.

Remember, that China has a great number of consumers yearning to spend and buy things.

To me, the great challenge for China is income equity. They need to put money into the hands of the middle and lower classes so that they can grow their markets.

The central government top levels of leadership is very competent. The problem in China is the local and provincial level where corruption is endemic. The local leadership oftentimes consists of uneducated former peasant/laborers who run their fiefs like mafia bosses.

[briansd1]

Good article.

I do agree that China due for a bubble burst. When will that happen? Hard to predict.

Sure the bubble (or many small bubbles) will burst, but China will pickup and get over it, just like America did when we were growing during industrial revolution to the 1950s.

Remember, that China has a great number of consumers yearning to spend and buy things.

To me, the great challenge for China is income equity. They need to put money into the hands of the middle and lower classes so that they can grow their markets.

The central government top levels of leadership is very competent. The problem in China is the local and provincial level where corruption is endemic. The local leadership oftentimes consists of uneducated former peasant/laborers who run their fiefs like mafia bosses.

[Allan from Fallbrook]

[quote=briansd1]
The central government top levels of leadership is very competent. [/quote]

Very much so. They handled the fallout from Mao’s “Great Leap Forward” with considerable aplomb. Of course, the millions upon millions of dead Chinese peasants were a problem…

Every level of Chinese government is a joke. The upper echelons simply do a better job of covering their ineptitude. From SARS to the Uighurs to the environmental catastrophe that is Chinese manufacturing to ginning up economics numbers, you have all the same type players that wrecked Soviet Russia, just of different ethnicity.

I refuse to work in China, but know quite a few companies that do security and force protection work there and it is bad news. Considerable social unrest, problems with Muslims and ethnic minorities, a group of disaffected former People’s Army officers numbering 200,000 strong that are on the verge of insurrection, etc, etc, etc.

The idea that China is floating is the same one that the Soviets were floating during the Cold War: Cultural homogeneity, backed by a monolithic centrally controlled economy and military. We all know how that turned out. As with the Soviets, pick at the threads hard enough and the truth eventually wills out.

[Allan from Fallbrook]

[quote=briansd1]
The central government top levels of leadership is very competent. [/quote]

Very much so. They handled the fallout from Mao’s “Great Leap Forward” with considerable aplomb. Of course, the millions upon millions of dead Chinese peasants were a problem…

Every level of Chinese government is a joke. The upper echelons simply do a better job of covering their ineptitude. From SARS to the Uighurs to the environmental catastrophe that is Chinese manufacturing to ginning up economics numbers, you have all the same type players that wrecked Soviet Russia, just of different ethnicity.

I refuse to work in China, but know quite a few companies that do security and force protection work there and it is bad news. Considerable social unrest, problems with Muslims and ethnic minorities, a group of disaffected former People’s Army officers numbering 200,000 strong that are on the verge of insurrection, etc, etc, etc.

The idea that China is floating is the same one that the Soviets were floating during the Cold War: Cultural homogeneity, backed by a monolithic centrally controlled economy and military. We all know how that turned out. As with the Soviets, pick at the threads hard enough and the truth eventually wills out.

[Allan from Fallbrook]

[quote=briansd1]
The central government top levels of leadership is very competent. [/quote]

Very much so. They handled the fallout from Mao’s “Great Leap Forward” with considerable aplomb. Of course, the millions upon millions of dead Chinese peasants were a problem…

Every level of Chinese government is a joke. The upper echelons simply do a better job of covering their ineptitude. From SARS to the Uighurs to the environmental catastrophe that is Chinese manufacturing to ginning up economics numbers, you have all the same type players that wrecked Soviet Russia, just of different ethnicity.

I refuse to work in China, but know quite a few companies that do security and force protection work there and it is bad news. Considerable social unrest, problems with Muslims and ethnic minorities, a group of disaffected former People’s Army officers numbering 200,000 strong that are on the verge of insurrection, etc, etc, etc.

The idea that China is floating is the same one that the Soviets were floating during the Cold War: Cultural homogeneity, backed by a monolithic centrally controlled economy and military. We all know how that turned out. As with the Soviets, pick at the threads hard enough and the truth eventually wills out.

[Allan from Fallbrook]

[quote=briansd1]
The central government top levels of leadership is very competent. [/quote]

Very much so. They handled the fallout from Mao’s “Great Leap Forward” with considerable aplomb. Of course, the millions upon millions of dead Chinese peasants were a problem…

Every level of Chinese government is a joke. The upper echelons simply do a better job of covering their ineptitude. From SARS to the Uighurs to the environmental catastrophe that is Chinese manufacturing to ginning up economics numbers, you have all the same type players that wrecked Soviet Russia, just of different ethnicity.

I refuse to work in China, but know quite a few companies that do security and force protection work there and it is bad news. Considerable social unrest, problems with Muslims and ethnic minorities, a group of disaffected former People’s Army officers numbering 200,000 strong that are on the verge of insurrection, etc, etc, etc.

The idea that China is floating is the same one that the Soviets were floating during the Cold War: Cultural homogeneity, backed by a monolithic centrally controlled economy and military. We all know how that turned out. As with the Soviets, pick at the threads hard enough and the truth eventually wills out.

[Allan from Fallbrook]

[quote=briansd1]
The central government top levels of leadership is very competent. [/quote]

Very much so. They handled the fallout from Mao’s “Great Leap Forward” with considerable aplomb. Of course, the millions upon millions of dead Chinese peasants were a problem…

Every level of Chinese government is a joke. The upper echelons simply do a better job of covering their ineptitude. From SARS to the Uighurs to the environmental catastrophe that is Chinese manufacturing to ginning up economics numbers, you have all the same type players that wrecked Soviet Russia, just of different ethnicity.

I refuse to work in China, but know quite a few companies that do security and force protection work there and it is bad news. Considerable social unrest, problems with Muslims and ethnic minorities, a group of disaffected former People’s Army officers numbering 200,000 strong that are on the verge of insurrection, etc, etc, etc.

The idea that China is floating is the same one that the Soviets were floating during the Cold War: Cultural homogeneity, backed by a monolithic centrally controlled economy and military. We all know how that turned out. As with the Soviets, pick at the threads hard enough and the truth eventually wills out.

[ocrenter]

The problem with China-nay-sayers is they do not understand the Chinese playbook, which was pirated word for word from the South Korean and Taiwanese editions. The scary part for most folks is that South Korea + Taiwan = a single province in China in population size.

The Chinese is following the same pathway paved by the South Koreans and the Taiwanese. Both of those countries were under what we would call “capitalist authoritarian regimes” who guided growth and development until the economy took off.

If you look at the South Korean and Taiwanese GDP growth chart from the 60’s, both were showing steady upward trend, then both took off in the 90’s, but instead of continued skyward trend (which was what happened to Japan and its bubble), both nations then bended back to slow upward trend after reaching developed nation status in 00’s. That second bending of the curve received a lot of bad press in both countries, but it was the right course in retrospect. If you count, we are looking at 40-50 years post development for that 2nd bending of the curve to develop.

If you are afraid of a Chinese bubble, that is what you watch for. If you see that skyward trend continuing even after the average Chinese PPP per capita reach beyond $20-25k, then yes, you got a bubble forming. But it goes deeper then that. Because China is so big, you got to look at its ~40 provinces/municipalities as 40 countries individually.

For example, Shanghai (population of 16 million) currently has a PPP per capita of $20k. we should start to see Shanghainese growth rate slowing down over the next decade as that municipality reach “developed status.” If it doesn’t, then there’s a problem. What should happen is Shanghainese growth rate will flatten as investors depart Shanghai and attack inland provinces next door (kinda like how Hong Kong investors went to Guangdong and how Taiwanese investors went to Fujian).

[img_assist|nid=12585|title=|desc=|link=node|align=left|width=446|height=275]

The graph here shows the Shanghainese GDP growth. now the 2008 decline from 14% growth to 9.7% may be due to the global recession. but the idea here is we should be seeing a slowing from double digit growth to single digit growth for the city. But the rest of China will continue high flying at double digit growth and that is ok, and not indicative of a brewing bubble.

[ocrenter]

The problem with China-nay-sayers is they do not understand the Chinese playbook, which was pirated word for word from the South Korean and Taiwanese editions. The scary part for most folks is that South Korea + Taiwan = a single province in China in population size.

The Chinese is following the same pathway paved by the South Koreans and the Taiwanese. Both of those countries were under what we would call “capitalist authoritarian regimes” who guided growth and development until the economy took off.

If you look at the South Korean and Taiwanese GDP growth chart from the 60’s, both were showing steady upward trend, then both took off in the 90’s, but instead of continued skyward trend (which was what happened to Japan and its bubble), both nations then bended back to slow upward trend after reaching developed nation status in 00’s. That second bending of the curve received a lot of bad press in both countries, but it was the right course in retrospect. If you count, we are looking at 40-50 years post development for that 2nd bending of the curve to develop.

If you are afraid of a Chinese bubble, that is what you watch for. If you see that skyward trend continuing even after the average Chinese PPP per capita reach beyond $20-25k, then yes, you got a bubble forming. But it goes deeper then that. Because China is so big, you got to look at its ~40 provinces/municipalities as 40 countries individually.

For example, Shanghai (population of 16 million) currently has a PPP per capita of $20k. we should start to see Shanghainese growth rate slowing down over the next decade as that municipality reach “developed status.” If it doesn’t, then there’s a problem. What should happen is Shanghainese growth rate will flatten as investors depart Shanghai and attack inland provinces next door (kinda like how Hong Kong investors went to Guangdong and how Taiwanese investors went to Fujian).

[img_assist|nid=12585|title=|desc=|link=node|align=left|width=446|height=275]

The graph here shows the Shanghainese GDP growth. now the 2008 decline from 14% growth to 9.7% may be due to the global recession. but the idea here is we should be seeing a slowing from double digit growth to single digit growth for the city. But the rest of China will continue high flying at double digit growth and that is ok, and not indicative of a brewing bubble.

[ocrenter]

The problem with China-nay-sayers is they do not understand the Chinese playbook, which was pirated word for word from the South Korean and Taiwanese editions. The scary part for most folks is that South Korea + Taiwan = a single province in China in population size.

The Chinese is following the same pathway paved by the South Koreans and the Taiwanese. Both of those countries were under what we would call “capitalist authoritarian regimes” who guided growth and development until the economy took off.

If you look at the South Korean and Taiwanese GDP growth chart from the 60’s, both were showing steady upward trend, then both took off in the 90’s, but instead of continued skyward trend (which was what happened to Japan and its bubble), both nations then bended back to slow upward trend after reaching developed nation status in 00’s. That second bending of the curve received a lot of bad press in both countries, but it was the right course in retrospect. If you count, we are looking at 40-50 years post development for that 2nd bending of the curve to develop.

If you are afraid of a Chinese bubble, that is what you watch for. If you see that skyward trend continuing even after the average Chinese PPP per capita reach beyond $20-25k, then yes, you got a bubble forming. But it goes deeper then that. Because China is so big, you got to look at its ~40 provinces/municipalities as 40 countries individually.

For example, Shanghai (population of 16 million) currently has a PPP per capita of $20k. we should start to see Shanghainese growth rate slowing down over the next decade as that municipality reach “developed status.” If it doesn’t, then there’s a problem. What should happen is Shanghainese growth rate will flatten as investors depart Shanghai and attack inland provinces next door (kinda like how Hong Kong investors went to Guangdong and how Taiwanese investors went to Fujian).

[img_assist|nid=12585|title=|desc=|link=node|align=left|width=446|height=275]

The graph here shows the Shanghainese GDP growth. now the 2008 decline from 14% growth to 9.7% may be due to the global recession. but the idea here is we should be seeing a slowing from double digit growth to single digit growth for the city. But the rest of China will continue high flying at double digit growth and that is ok, and not indicative of a brewing bubble.

[ocrenter]

The problem with China-nay-sayers is they do not understand the Chinese playbook, which was pirated word for word from the South Korean and Taiwanese editions. The scary part for most folks is that South Korea + Taiwan = a single province in China in population size.

The Chinese is following the same pathway paved by the South Koreans and the Taiwanese. Both of those countries were under what we would call “capitalist authoritarian regimes” who guided growth and development until the economy took off.

If you look at the South Korean and Taiwanese GDP growth chart from the 60’s, both were showing steady upward trend, then both took off in the 90’s, but instead of continued skyward trend (which was what happened to Japan and its bubble), both nations then bended back to slow upward trend after reaching developed nation status in 00’s. That second bending of the curve received a lot of bad press in both countries, but it was the right course in retrospect. If you count, we are looking at 40-50 years post development for that 2nd bending of the curve to develop.

If you are afraid of a Chinese bubble, that is what you watch for. If you see that skyward trend continuing even after the average Chinese PPP per capita reach beyond $20-25k, then yes, you got a bubble forming. But it goes deeper then that. Because China is so big, you got to look at its ~40 provinces/municipalities as 40 countries individually.

For example, Shanghai (population of 16 million) currently has a PPP per capita of $20k. we should start to see Shanghainese growth rate slowing down over the next decade as that municipality reach “developed status.” If it doesn’t, then there’s a problem. What should happen is Shanghainese growth rate will flatten as investors depart Shanghai and attack inland provinces next door (kinda like how Hong Kong investors went to Guangdong and how Taiwanese investors went to Fujian).

[img_assist|nid=12585|title=|desc=|link=node|align=left|width=446|height=275]

The graph here shows the Shanghainese GDP growth. now the 2008 decline from 14% growth to 9.7% may be due to the global recession. but the idea here is we should be seeing a slowing from double digit growth to single digit growth for the city. But the rest of China will continue high flying at double digit growth and that is ok, and not indicative of a brewing bubble.

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