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Thread: China Bubble About to Burst ?

  1. #1
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    Default China Bubble About to Burst ?

    what do you think the consequences will be and how will they reverberate to affect you?
    Last edited by C. Flower; 21-06-2015 at 10:14 PM.
    FF dont play the Irish public for fools, they know them to be.

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    Default Re: Imminent Collpase of Chinese Property Bubble

    http://www.reuters.com/article/idUST...2:b32818204:z0

    Fantastic description of "the anatomy of a property bubble" here -

    Standing in the shouting tumult of a Chinese real estate fair, Chen Shiyong said, feels like watching a suicidal man on top of a building ignoring the pleas of bystanders to pull back from the edge.

    Not that many of the some 142,000 potential buyers and curious visitors who crowded into Beijing's latest big housing property sales fair over the weekend were buying Chen's warning of the impending collapse of a price bubble.
    Many said commercial housing prices in the Chinese capital and other cities were sure to keep rising, perhaps after a brief dip, shrugging off government efforts to cool the market. The disheartened said prices already well beyond their grasp were unlikely to come down.

    "Nobody is listening to the government leaders. There's this mentality that has set in that this is a no-loss market," Chen said, nodding at the crowds around miniature building displays in Beijing's China World Trade Center.

    "It's like watching a suicidal man who won't listen to anyone. Whatever you tell him, it simply strengthens his notion that he's right and the rest are wrong," said Chen, a twenty-something investment analyst for Changjiang Securities, wearing thick glasses and a leather jacket.
    The Chinese government shares some of his jitters.

    Over the weekend, the top bank regulator, Liu Mingkang, said the country's banks must do more to rein in risky lending to land developers.
    The average selling price of properties of seven major developers in mainland China increased from 8,069 yuan ($1,182) per square meter in November last year to 10,810 yuan in March, Royal Bank of Scotland said in a report issued on Monday.
    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
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    Default Re: Imminent Collpase of Chinese Property Bubble

    It looks like the chinese bubble is ready to burst:-

    INVESTOR Marc Faber said China's economy will slow and possibly "crash" within a year as declines in stock and commodity prices signal the nation's property bubble is set to burst.

    The Shanghai Composite Index had failed to regain its 2009 high while industrial commodities and shares of Australian resource exporters were acting "heavy", Mr Faber said.
    http://www.independent.ie/business/w...l-2163239.html

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    Default Re: Imminent Collpase of Chinese Property Bubble

    It sounds like Japan all over again.

    Only India seems to have attempted to put some shape on the property bubble, but even they can't stop hot money coming in from outside.

    As Brian Lenihan would (not) say - its systemic.

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    Default Re: Imminent Collpase of Chinese Property Bubble

    Quote Originally Posted by ang View Post
    It looks like the chinese bubble is ready to burst:-



    http://www.independent.ie/business/w...l-2163239.html
    Am I right in thinking this is going to have worldwide ramifications, and bring on the famous Double Dip recession? I dont see how it would stop the Manufacturing sector assuming most of it is exported around the world. If Chinese people stop buying stuff, does it affect the World or just China?
    The first robot president won by exactly one vote. Ah, yes! John Quincy Adding Machine. He struck a chord with the voters when he pledged not to go on a killing spree. But, like most politicians he promised more than he could deliver.

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    Default Re: Imminent Collpase of Chinese Property Bubble

    There is a good article here on the chinese bubble it's quite amazing how dependent they are on their construction sector:-

    China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos.

    The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The
    http://www.bloomberg.com/apps/news?p...K2dtdXg&pos=11

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    Default Re: Imminent Collpase of Chinese Property Bubble

    Quote Originally Posted by BrendanGalway View Post
    If Chinese people stop buying stuff, does it affect the World or just China?
    If the stuff is US bonds, then yes.
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

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    Default Re: Imminent Collpase of Chinese Property Bubble

    the chinese people buy sweet **** all - they are kept poor and under control.

    the Chinese government on the other hand...............

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    Default Chinese Bubble About To Burst ?

    It's clear that the China Bubble is about to burst (possibly within months and no more than a couple of years, max.). Hedge funds are now betting on it and all the signs are that the Chinese bubble, particularly in property, has become the biggest in the world. This, when it comes, will be a massive shock to the world economy. Commodity prices will drop suddenly, and countries dependent on their export will suffer and will buy fewer imports.

    The economy has simply overheated, become less competitive and inflationary, particularly in the property boom, which resembles the Irish one in terms of over building - where we had "ghost estates" they have "ghost cities".

    http://english.yonhapnews.co.kr/news...004800320.HTML

    (Yonhap) -- One out of 1,400 Chinese is estimated to be a millionaire, a report showed Thursday, indicating that China's robust economic growth has boosted the number of rich people in the country.
    http://www.telegraph.co.uk/finance/f...cle8447614.ece

    a hedge fund manager in Mayfair was poring over spreadsheets of sovereign and corporate credit default swaps, interest rate and foreign exchange options with one aim: to “get short on China”. The manager, who wanted to remain anonymous, said: “The Chinese delegation has said all week that there will be double-digit growth for years to come and the Brits have lapped it up. But the data doesn’t add up. We think we’ve experienced credit bubbles over the past few years, but China is the biggest. And yet the global economy is looking to China as not just a crutch but a springboard out of the recession. It’s crazy.”
    China has just announced it will spend 200 billion on urban homes to try to take the heat out of the property market - too little, too late - house prices are inflated this will even further overheat the property sector.

    http://www.google.ie/url?sa=t&source...dNGEyuehWaHECw

    60 % of China's GDP is now construction related.

    http://seekingalpha.com/article/2575...-will-collapse

    A recent study by Fitch concluded that if China’s growth falls to 5pc this year rather than the expected 10pc, global commodity prices would plunge by as much as 20pc. China is the global price-setter for oil, coal and base metals.
    China’s currency peg has increased its dependence on manufacturing, which has deterred other service- and consumer- oriented segments of the economy from growing as rapidly as they should have. This is further complicated by the pressures created by the real estate bubble, which have driven up the cost of living significantly in China’s major cities.


    As workers are increasingly getting squeezed, they demand higher wages and better labor protections. They are right to do so, of course, but this further undermines the manufacturing sector that is based around low-wage unskilled labor. As Chinese wages grow, more manufacturing shifts to Southeast Asia and other lower-cost areas.


    In other words, China is stuck. The currency peg has created a situation where China has prevented its economy from expanding beyond manufacturing. Meanwhile, it’s created a credit-fueled bubble that has undermined the low costs of that manufacturing industry. The only thing that’s left is to keep building things that no one needs.


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    Default Re: Chinese Bubble About To Burst ?

    China certainly has bubble characteristics, but predicting when bubbles will burst is almost impossible. When I first visited China in the late 1990's, I thought it had all the characteristics of a bubble (I wasn't alone, later Gordon Chang wrote a best seller predicting it). Later, i was sure that it was going to burst big time after the Beijing Olympics, as everything seemed to have overheated to an insane level, but huge productivity gains and some smart policies seem to have averted it. But once again, its steaming ahead full steam.

    But there are certainly huge problems - and the official figures don't always show how bad it is. Chinese friends of mine tell me that the real increase in property prices is much greater than official figures show. There is massive building in advance of demand - which so far has paid off for developers.

    I think the real boobytrap for the Chinese economy is the lack of a decent tax base for local governments. Something like a third of local and regional finances (I can't recall the exact figure now) essentially comes from land seizures. They build a road or railway, financing it by 'purchasing' (i.e. taking) land from peasants, and using rising values from the infrastructure to pay for the road, with surplus for other expenditures. If land values go into reverse, these local governments will be horribly exposed, with no alternative sources of revenue to plug the holes. And since they control the banks, they will loot the banks to hide their embarrassment. Its potentially a very unstable system.

    That said, the Chinese have almost obsessively studied the other developed Asian nations, especially Japan, to see how they can avoid their pitfalls. The Chinese government have shown themselves to be remarkably smart at managing the economy so far - witness how they kept growth going strongly after 2007 - so they may yet manage to avoid a catastrophe. The growth in productivity is spectacular, this may allow them to do so. Unfortunately, they are also running into a series of energy and infrastructure bottlenecks which may cut off productivity growth.

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    Default Re: Chinese Bubble About To Burst ?

    There was an interesting article in the FT yesterday about this. It seems that the government tried to clamp down on the propoerty bubble by putting pressure on the State-owned banks to stop lending to property developers. It seems many property developers turned to international institutions for funds and loans, and the bubble is continuing to grow apace.
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    Default Re: Chinese Bubble About To Burst ?

    Possible. Though if the collapse in .cn domain names is anything to go by (from about 14 million domains and ahead of Germany's .de country code to about 3.1 million at present), China is in for a rough time. The loss in domains was due to low price/junk domains being dropped and the .cn domain registry moving away from an open model where anyone could register .cn domains to a one where documentation was required for non-Chinese businesses and registrants. But even so, the tech sectors tend to be very sensitive to economic variations.

    Regards...jmcc

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    Default Re: Chinese Bubble About To Burst ?

    Noticed the Chinese policy of 'harmonious society' seems to be behind the efforts to cap the growth volcano or allow some steam to escape. Its a delicate balance the Chinese are after behind Reaganomic power to the nth degree and not tipping their own economy over a shock-edge and into a debt spiral.

    There's every sign that the Chinese learned a lot from watching how Reagan deliberately turned on the afterburners on the US economy once the Americans realised the Soviets were straining their planned economy to try to keep up and basically blew up them up in the deficit race of the eighties...

    The Chinese I think duly noted that and what happened to the US economy later as the rich mixture in its tanks began to burn low and sputter after the Soviet burnoff. I think there is every reason to believe that the Chinese are attempting the same thing with the US but are aware of the need for exquisite judgement and when to let steam out of their engines.

    While George Bush was playing Risk around the world the Chinese were playing Monopoly and they now hold the bank. The only question remaining is not whether they have won (that game is definitely in the bag over the US) but whether they can control the demon they've unleashed in the process.
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

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    Default Re: Chinese Bubble About To Burst ?

    Quote Originally Posted by jmcc View Post
    Possible. Though if the collapse in .cn domain names is anything to go by (from about 14 million domains and ahead of Germany's .de country code to about 3.1 million at present), China is in for a rough time. The loss in domains was due to low price/junk domains being dropped and the .cn domain registry moving away from an open model where anyone could register .cn domains to a one where documentation was required for non-Chinese businesses and registrants. But even so, the tech sectors tend to be very sensitive to economic variations.

    Regards...jmcc

    That's interesting. Was there any similar pattern in Ireland or were we not entrepreneurial enough for it to happen here?

    It sounds to me as if they may be in our 2006, when property prices flattened off and there were various hopeless attempts to protract the bubble which only made the fall harder when it happened. Housing is an example in China. Had they kept housing as a public sector business, they could have built to need rather than as a hunt after profit. Now, when demand seems to be flat, the State is proposing to build 39 million homes, supposedly to keep prices down, but as this will keep demand for skilled labour and construction materials up, it can't bring prices down.

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    Default Re: Chinese Bubble About To Burst ?

    Hm. A Chinese NAMA before-the-fact as opposed to an Irish after-the-fact NAMA?
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

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