Wed 2010-09-15 19:16 EDT
Trapped Inside A Property Bubble
When China's real estate bubble finally bursts while exports become less competitive, the consequences could be severe...
Andy Xie Topic in The Credit Debacle Catalog
Andy Xie reports (1); Andy Xie thinks (1); Morgan Stanley Analyst Andy Xie explains (1).
naked capitalism Thu 2010-08-05 20:07 EDT
Andy Xie on China's Empty Apartments
...Recent articles in media have illustrated how out of line prices are with incomes and rental yields...Chinese officialdom is worried about the social implications of overpriced housing...[Andy Xie reports] that the number of vacant apartments in China, the result of speculative warehousing (purchased as an investment but kept vacant) plus new construction languishing unsold is much greater than commonly realized...Justin Weleski: ``the Chinese housing market is incredibly nuanced. Many/most Western analyses, however, are extremely superficial and do not take into account the very unique circumstances and customs of Chinese society.'' ...a lot of these vacant apartments are owned by overseas Chinese planning their retirement, and not for speculation. If you add up the 50 million plus overseas Chinese, you have a pretty sizable pool of money and influence...China is not a renter friendly society...many people are forced to buy apartments, at riduculously price, just for the hope that their child can go to a good school...
Tue 2010-04-20 10:58 EDT
Get the Yuan Right, Prove Pundits Wrong: Hype over an 'imminent' increase in yuan value ignores China's greater need for higher interest rates and fewer bubbles
Unless China exits its economic stimulus quickly, the nation's inflation rate could rise to double digit levels sooner than many expect. The right sequence of events for a proper response to inflation would be to raise interest rates and then, if necessary, move the yuan exchange rate. But acting on the currency first, especially in small steps, would further inflate China's property bubble and inflation, potentially leading to a major economic crisis in two years. A small increase in the yuan's value would fail to resolve two pressing problems: inflationary pressure at home, and political pressure from the United States. Moreover, a small appreciation would attract hot money, stoking inflationary pressure...
bubble; higher interest rate; hype; imminent; increased; proving pundits wrong; Yuan right; yuan value ignores China's greater need.
Thu 2010-01-07 19:04 EST
Andy Xie: Why China and Japan Need an East Asia Bloc
By promoting ideas that lean toward Asia, DPJ's leadership is signaling that Japan wants less dependence on the United States. This position offers a hope for the future to Japanese people, whose economy has been comatose for two decades. Closer integration with Asian neighbors could restore growth in Japan...The best approach would be for China and Japan to negotiate a comprehensive FTA that encompasses free-flowing goods, services and capital. This task may appear too difficult, but recent changes have made it possible. The two countries should give it a try.
Mish's Global Economic Trend Analysis Fri 2009-12-18 09:52 EST
China Faces Crash Scenario
Problems in China continue to mount. Money supply is growing rampantly out of control, property prices are in a bubble, exports are weak, commodity speculation is pervasive, and GDP growth is more of a mirage than real...I side with Andy Xie who states ``China's asset markets are a Ponzi scheme''...Various Chinese asset bubbles are guaranteed to pop, but as I have said many times, the timing of such events is unknown. In this case however, I am more apt to believe sooner, rather than later.
China Faces Crash Scenario; Mish's Global Economic Trend Analysis.
naked capitalism Wed 2009-11-25 11:13 EST
If the Fed is looking to inflate away problems, what should Asia do?
Andy Xie thinks the Fed is on an inflationary path. Last month, he wrote an article in Caijing which says that `stagflation lite' is the Federal Reserve's preferred outcome. What's interesting is his recent article about the need for China and Japan to join forces under an ASEAN umbrella, rejecting the APEC umbrella shared with the U.S.
Asia; Fed; inflate away problems; looking; naked capitalism.
The Big Picture Wed 2009-10-14 11:36 EDT
Andy Xie: Here We Go Again
Former Morgan Stanley Analyst Andy Xie explains why China is a potential bubble: [Consider] the US Savings and Loans crisis of the late 1980s and early 1990s. The US Federal Reserve kept monetary policy loose to help the banking system. The dollar went into a prolonged bear market. During the descent, Asian economies that pegged their currencies to the dollar could increase money supply and lending without worrying about devaluation, but the money couldn't leave home due to the dollar's poor outlook, so it went into asset markets. When the dollar began to rebound in 1996, Asian economies came under tightening pressure that burst their asset bubbles. The collapsing asset prices triggered capital outflows that reinforced asset deflation. Asset deflation destroyed their banking systems. In short, the US banking crisis created the environment for a credit boom in Asia. When US banks recovered, Asian banks collapsed. Is China heading down the same path? There are many anecdotes to support the comparison. Property prices in Southeast Asia became higher than those in the US, but ``experts'' and government officials had stories to explain it, even though their per capita income was one-tenth that of the US. Their banks also commanded huge market capitalizations, as financial markets extended their growth ad infinitum. The same thing is happening in China today. When something seems too good to be true, it is. World trade -- the engine of global growth -- has collapsed. Employment is still contracting throughout the world. There are no realistic scenarios for the global economy to regain high and sustainable growth. China is an export-driven economy. Bank lending can support the economy for a short time, however, stocks are as expensive as during the heydays of the last bubble. Like all previous bubbles, this one, too, will burst.
The Big Picture Sun 2009-10-11 17:12 EDT
Andy Xie: Why One Bubble Burst Deserves Another
...Lehman died in vain. Today, governments and central banks are celebrating their victorious stabilizing of the global financial system. To achieve the same, they could have saved Lehman with US$ 50 billion. Instead, they have spent trillions of dollars -- probably more than US$ 10 trillion when we get the final tally -- to reach the same objective. Meanwhile, a broader goal to reform the financial system has seen absolutely no progress...The lesson from the Lehman collapse seems to be, ``Take whatever you can and, when it crashes, you get to keep it.'' How governments and central banks have dealt with this bubble will encourage more people to join bubble making in the future.
Mon 2009-10-05 11:23 EDT
New Bubble Threatens a V-Shaped Rebound
...What we are seeing now in the global economy is a pure liquidity bubble. It's been manifested in several asset classes. The most prominent are commodities, stocks and government bonds. The story that supports this bubble is that fiscal stimulus would lead to quick economic recovery, and the output gap could keep inflation down. Hence, central banks can keep interest rates low for a couple more years...I think the market is being misled. The driving forces for the current bounce are inventory cycle and government stimulus. The follow-through from corporate capex and consumption are severely constrained by structural challenges. These challenges have origins in the bubble that led to a misallocation of resources. After the bubble burst, a mismatch of supply and demand limited the effectiveness of either stimulus or a bubble in creating demand...he structural challenges arise from global imbalance and industries that over-expanded due to exaggerated demand supported in the past by cheap credit and high asset prices. At the global level, the imbalance is between deficit-bound Anglo-Saxon economies (Australia, Britain and the United States) and surplus emerging economies (mainly China and oil exporters)...The old equilibrium cannot be restored, and many structural barriers stand in the way of a new equilibrium. The current recovery is based on a temporary and unstable equilibrium in which the United States slows the rise of its national savings rate by increasing the fiscal deficit, and China lowers its savings surplus by boosting government spending and inflating an assets bubble.