Chinese Bubble About To Burst ?

[Yojimbo]

Michael Pettis in a detailed (and slightly technical) argument takes down the China 'bulls' very effectively in this argument I think:

http://www.mpettis.com/2012/10/07/ho...-a-china-bull/

One implication (not directly set out) in Pettis' arguments is that China could well keep going for some time (like a middle aged marathon runner who gets a shot of crystal meth, as he puts it), but that the reverse could be extremely sudden and dramatic. And it seems at least some Chinese policy makers are well aware of this (but others, inevitably, assume long term trends keep going forever).

[Count Bobulescu]

Michael Pettis in a detailed (and slightly technical) argument takes down the China 'bulls' very effectively in this argument I think:

http://www.mpettis.com/2012/10/07/ho...-a-china-bull/

One implication (not directly set out) in Pettis' arguments is that China could well keep going for some time (like a middle aged marathon runner who gets a shot of crystal meth, as he puts it), but that the reverse could be extremely sudden and dramatic. And it seems at least some Chinese policy makers are well aware of this (but others, inevitably, assume long term trends keep going forever).

Good piece, I really like the predictions based on earlier predictions logic. I hereby resolve to adopt that model with respect to my personal finances. Bank manager I predict you really will need to lend me more.

[Yojimbo]

A fascinating article here in the New Yorker about the staggering growth of China's High Speed Railway system and the enormous cost of corruption.

http://www.newyorker.com/reporting/2...urrentPage=all

[Count Bobulescu]

A fascinating article here in the New Yorker about the staggering growth of China's High Speed Railway system and the enormous cost of corruption.

http://www.newyorker.com/reporting/2...urrentPage=all

Here’s an interview with Evan Osnos the author of the New Yorker piece. 22 minutes. Hope the link works.

http://www.charlierose.com/view/interview/12605

[Count Bobulescu]

As Chinese cities push plans to invest hundreds of billions of yuan in “key industries” in order to juice slowing economic growth, a new report illustrates how such spending binges, far from placating society, might actually threaten stability in the country.

In a report released Thursday, human rights watchdog Amnesty International notes a recent rise in violent forced evictions, one of the country’s most explosive issues, and traces it to the massive stimulus Beijing unleashed in 2008 and 2009 in response to the global financial crisis.

http://www.amnesty.org/en/news/china...ent-2012-10-11

[Yojimbo]

Here’s an interview with Evan Osnos the author of the New Yorker piece. 22 minutes. Hope the link works.

http://www.charlierose.com/view/interview/12605

Thats a really interesting interview. I find it curious that despite everything he knows about how the Chinese system works, he still falls into the 'bulls' in terms of China's future. I'm not sure I'd be so optimistic.

[Yojimbo]

And for another view.... it seems there is now growing optimism (at least from Goldman Sachs) that China has hit the bottom and has avoided a really bad recession:

http://www.businessinsider.com/jim-o...anding-2012-10

[Count Bobulescu]

And for another view.... it seems there is now growing optimism (at least from Goldman Sachs) that China has hit the bottom and has avoided a really bad recession:

http://www.businessinsider.com/jim-o...anding-2012-10

It's part of O'Neill's job at Goldman to be optimistic.

[Yojimbo]

It's part of O'Neill's job at Goldman to be optimistic.

Ah yes, he is the Vampire Squids Mr. Sunshine, isn't he?

[Count Bobulescu]

More from Evan Osnos at the New Yorker

Two days after Americans go to the polls, China will embark with great fanfare on its own leadership transition, anointing a new generation of men—and they almost certainly will all be men—to run the country for the next ten years. A team of seven, the Standing Committee of the Politburo of the Chinese Communist Party, will intone their official priorities for the new term: economic rebalancing, technological innovation, and territorial integrity, among other things.

There is one issue that they will not emphasize, but it is more essential to their Party’s survival than any other: combatting corruption

.

Read more http://www.newyorker.com/online/blog...#ixzz2APyPOsP4

http://www.newyorker.com/online/blog...tml#entry-more

[Count Bobulescu]

Ouch all round

ARTICLE OF THE DAY -- N.Y. Times 3-col. lead, "Billions Amassed in the Shadows By the Family of China's Premier" (two strip pages; 4,600 words), by David Barboza in Beijing: "Many relatives of [outgoing Prime Minister] Wen Jiabao [the country's top economic official], including his son, daughter, younger brother and brother-in-law, have become extraordinarily wealthy during his leadership, an investigation by The New York Times shows. A review of corporate and regulatory records indicates that the prime minister's relatives, some of whom have a knack for aggressive deal-making, including his wife, have controlled assets worth at least $2.7 billion. In many cases, the names of the relatives have been hidden behind layers of partnerships and investment vehicles involving friends, work colleagues and business partners. ... [T]he family's ventures sometimes received financial backing from state-owned companies ... As prime minister in an economy that remains heavily state-driven, Mr. Wen ... has broad authority over the major industries where his relatives have made their fortunes. ...

"Their ownership stakes are often veiled by an intricate web of holdings as many as five steps removed ... In the case of Mr. Wen's mother, The Times calculated her stake in Ping An [Insurance] ... by examining public records and government-issued identity cards, and by following the ownership trail to three Chinese investment entities. ... The apparent efforts to conceal the wealth reflect the highly charged politics surrounding the country's ruling elite, many of whom are also enormously wealthy but reluctant to draw attention to their riches. When Bloomberg News reported in June that the extended family of Vice President Xi Jinping, set to become China's next president, had amassed hundreds of millions of dollars in assets, the Chinese government blocked access inside the country to the Bloomberg Web site. ...

"The review of the corporate and regulatory records , which covers 1992 to 2012, found no holdings in Mr. Wen's name. ... For much of his tenure, Wen Jiabao has been at the center of rumors and conjecture about efforts by his relatives to profit from his position. Yet until the review by The Times, there has been no detailed accounting of the family's riches. ... As prime minister, Mr. Wen has staked out a position as a populist and a reformer, someone whom the state-run media has nicknamed 'the People's Premier' and 'Grandpa Wen' because of his frequent outings to meet ordinary people, especially in moments of crisis like natural disasters. ... 'Wen is disgusted with his family's activities, but is either unable or unwilling to curtail them,' a Chinese-born executive working at an American company in Shanghai told American diplomats, according to [a] 2007 cable [disclosed by Wikileaks]." http://nyti.ms/PU58E1

--THE CONTEXT - Financial Times: "Although [Wen] is set to retire after next month's congress, he has been one of the most important proponents of political reform in the party and is likely to seek to retain influence in driving that agenda after he steps down."

--THE FALLOUT - NYT A12, "China Blocks Web Access To Times After Article," by Keith Bradsher in Hong Kong : "The Chinese government swiftly blocked access ... to the English-language and Chinese-language Web sites of The New York Times from computers in mainland China ... The authorities were also blocking attempts to mention The Times or the prime minister, Wen Jiabao, in postings on Sina Weibo, an extremely popular mini-blogging service in China that resembles Twitter. ... By 7 a.m. Friday in China, access to both the English- and Chinese-language Web sites of The Times was blocked from all 31 cities in mainland China tested. The Times had posted the article in English at 4:34 p.m. on Thursday in New York (4:34 a.m. Friday in Beijing), and finished posting the article in Chinese three hours later after the translation of final edits to the English-language version." http://nyti.ms/XrWLA7

--In his lead from Beijing, WashPost's William Wan calls it an "explosive" article : "The scandal ... complicates the apparent intention of Chinese leaders to tackle corruption as a main issue at the Nov. 8 party congress, a move they have been signaling in the wake of other scandals that had dramatically shaken the party's core leadership. ... The blocking of the New York Times Web site sets back an effort by the company to attract Chinese readers and advertising. This summer, it launched a new Chinese-language Web site, which had the potential of drawing especially on China's booming luxury industry for revenue. ... The Times took the unusual step of making available a downloadable Chinese PDF version of the story on its website, which could make it easier to circulate by email in the face of censorship." http://wapo.st/Y2omXS

[Count Bobulescu]

China think tank urges gov't to end 1-child policy

BEIJING (AP) — A government think tank is urging Chinese leaders to start phasing out China's one-child policy immediately and allow two children for every family by 2015, a daring proposal to do away with the unpopular policy.
Some demographers see the timeline put forward by the China Development Research Foundation as a bold move by the body close to the central leadership. Others warn that the gradual approach, if implemented, would still be insufficient to help correct the problems that China's strict birth limits have created.
Xie Meng, a press affairs official with the foundation, said the final version of the report will be released "in a week or two." But Chinese state media have been given advance copies. The official Xinhua News Agency said the foundation recommends a two-child policy in some provinces from this year and a nationwide two-child policy by 2015. It proposes all birth limits be dropped by 2020, Xinhua reported

http://www.google.com/hostednews/ap/...64128b82d17224

[Yojimbo]

A long and rather technical and complex posting here by Michael Pettis on the topic of recent economic news from China and a number of articles on whether the RMB is becoming an alternative 'reserve' currency to the dollar:

http://www.mpettis.com/2012/11/17/is...sian-rmb-bloc/

In summary, he thinks the current news from China is a mix of good (it looks like the economy is not going into freefall) and bad (he still maintains it is likely to be locked into long term much lower growth).

His comments on the RMB are good though, and a useful corrective to the sort of nonsense frequently expressed, even in the likes of the Economist and FT. There is simply no reason to believe that the RMB is likely to be a 'competitor' to the dollar, and even less reason to believe the Chinese government wants it to be. People unnecessarily relate the question of a currencies dominance to the strength of the country. As he points out, its perfectly possible to be an insignificant world power while having a very powerful currency (e.g. the Spanish silver Dollar), or vice versa.

[Count Bobulescu]

This is a little off topic, but it’s just as appropriate here as in some of the alternative threads. The Sino Japanese Island Dispute thread doesn’t really cover this.

Here’s a map of China’s territorial claims and those of it’s neighbors.






Here’s an explanatory piece.

If you're worn out worrying about Syria, Gaza, Iran, you name it, I give you: the announcement today by police on China's large southern island of Hainan that, starting on January 1, they will assert a right to stop and board any vessel they consider to have violated China's very expansive claim of territorial waters in the South China Sea.

Take a look at this rendering of the area over which China asserts territorial sovereignty. More details below, but the red line encloses what China considers its own sovereign area; the blue shows Vietnam's claims; the purple shows those of the Philippines; the yellow is Malaysia's; and the green is from Brunei.

http://www.theatlantic.com/internati...-about/265763/

Nov 29 (Reuters) - Police in the southern Chinese island province of Hainan will board and search ships which illegally enter what China considers its territory in the disputed South China Sea, state media said on Thursday, a move likely to add to tensions.
The South China Sea is Asia's biggest potential military trouble spot with several Asian countries claiming sovereignty over waters believed to be rich in oil and gas.
The shortest route between the Pacific and Indian Oceans, it has some of the world's busiest shipping lanes. More than half the globe's oil tanker traffic passes through it.
New rules, which come into effect on Jan. 1, will allow Hainan police to board and seize control of foreign ships which "illegally enter" Chinese waters and order them to change course or stop sailing, the official China Daily reported.

http://www.reuters.com/article/2012/...0991Z020121130

[Yojimbo]

The Chinese stock market surges:

http://www.businessinsider.com/shang...-surge-2012-12

There are obviously plenty of optimists around!