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...
China's Topic in The Credit Debacle Catalog
China s Economy (1); China s looming financial crisis (1); China's ability (1); China's asset markets (1); China's bad loans (1); China's banks (1); China's biggest export trading partner (1); China's bubble bursting (1); China's capacity (1); China's capex boom (1); China's case (1); China's central bank (1); China's currency (2); China's Currency Peg (1); China's currency remains joined (1); China's decision (1); China's dollar denominated reserve assets (1); China's economic well (1); China's Empty Apartments (1); China's exporters (2); China's Exporters Hanging (1); China's Exports Fall 17 (1); China's Foreign Reserve Increases Accelerate (1); China's FX Reserves (1); China's Global Shopping Spree (1); China's inflation-free route (1); China's long-term strategy (1); China's makers (1); China's massive overcapacity real estate bubble (1); China's property (3); China's Property Bubble (2); China's real estate bubble finally bursts (1); China's recent pact (1); China's reserve growth (4); China's Reserves (5); China's Sinopec (1); China's Smoot Hawley (1); China's state-owned companies (1); china's stock market crash tracking historic patterns (1); China's Wen Worries (1); compares China's development path (1); completely overturned China's traditional concepts (1); controls China's (1); currency values versus China's (1); Fuel China's Housing Bubble (1); further inflate China's property bubble (1); Negotiated China's Entry (2); outline China's current vulnerability (1); yuan value ignores China's greater need (1).
naked capitalism Fri 2010-09-10 18:46 EDT
Auerback: China is Still a Renegade Nation
...In response to Beijing's mind boggling increase in real credit in the first half of 2009,Chinese fixed investment in industrial tradables rose dramatically...By the second quarter of this year some -- but only some -- of this new capacity began to come on stream. Further production responses to this new round of Chinese overinvestment lie ahead...But because of the potential protectionist threat and the underlying fragility at the heart of China's capex boom (along with the corruption of its political class), the change in status might prove to be ephemeral, much as Japan's vaunted rise to number 2 ultimately gave way to a post-bubble morass...in July Chinese domestic demand may have gone negative in real terms. It was only a huge improvement in net trade that kept production growth significantly positive on a sequential basis...The fact that China has the greatest fixed investment excess ever suggests that, when it unwinds, there will be a nasty economic adjustment in China...
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...
China Financial Markets Tue 2010-08-03 14:48 EDT
The capital tsunami is a bigger threat than the nuclear option
...China's ``nuclear option'', which has generated a great deal of nervousness among investors and policy-making circles in the US, is a myth, and what the US should be much more concerned about is its diametric opposite -- a tsunami of capital flooding into the country...All the major capital exporting countries...are eager to maintain and even increase their capital exports. But the balance of payments must balance, and all that exported capital must be imported somewhere else...As net capital exporters try desperately to maintain or increase their capital exports, and deficit Europe sees net capital imports collapse, the only way the world can achieve balance without a sharp contraction in the capital-exporting countries is if US net capital imports surge. And at first they will surge. Foreigners...will buy more dollar assets, including USG bonds, than before...the US trade deficit will inexorably rise as Germany, Japan and China try to keep up their capital exports and as European capital imports drop...This tsunami will bring with it a corresponding surge in the US trade deficit and, with it, a rise in US unemployment. It will also force the US Treasury to increase the fiscal deficit as more of the jobs created by its spending leak abroad...in the past massive capital recycling has usually been very good for asset markets. Might we see a surge in the US asset markets, at least until next year when Congress starts getting tough on the trade deficit?...
bigger threat; capital tsunami; China Financial Markets; nuclear option.
zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-07-30 15:41 EDT
China Has Been Covertly Funding A Housing Bubble Five Times Larger Than That Of The US: 65 Million Vacant Homes Uncovered
...a report [Fitch] released today titled Informal Securitisation Increasingly Distorting Credit Data, uncovers that China has in fact been massively underrepresenting the actual amount of new loans in the first half of 2010, courtesy of precisely the kinds of securitization deals that blew up half of our own banking system... [moreover, Yi Xianrong,] an economist at the Chinese Academy of Social Sciences noted estimates from electricity meter readings that there are about 64.5 million empty apartments and houses in urban areas of the country... China's banks are increasingly becoming more opaque in data presentation, which one can assume is due to their unwillingness to reveal the true state of affairs... [According to] Xianrong ``investment in the domestic property market has completely overturned China's traditional concepts of wealth management and investment and its price formation system'' [Chinese real estate bubble]
65; China; covert funding; dropped; housing bubble; long; survival rate; Time larger; Timeline; Vacant Homes Uncovered; zero; Zero Hedge.
Mish's Global Economic Trend Analysis Thu 2010-07-22 15:46 EDT
Ponzi "Shark Loans" Fuel China's Housing Bubble; Home Sales Plunge 44% in Xiamen; Bubble Busts in Tianjin
China's property bubble is now on the verge of collapse. Transaction volumes are significantly down and declining volume is how property bubbles always burst. In simple terms, the pool of greater fools eventually runs out. In China's case, the pool of fools is heavily involved in "loan shark" schemes where speculators hope property values rise fast enough to cover the interest.
Bubble bust; Fuel China's Housing Bubble; Home Sales Plunge 44; Mish's Global Economic Trend Analysis; Ponzi; Shark Loans; Tianjin; Xiamen.
Mish's Global Economic Trend Analysis Tue 2010-05-18 16:29 EDT
Canaries in Coalmine: China, Asia, not Participating in Euro Bailout Lovefest; Beginnings of China Credit, Real Estate Bust
Is China a canary in the coalmine of an impending global slowdown, or is China simply overloved as a beacon of growth as it was in 2008? I think it's both. China's property and infrastructure bubbles are massive; that is for certain. Moreover, China's biggest export trading partner is Europe, just as Europe is headed for numerous austerity programs. While it's doubtful the European austerity programs bring deficits down to where they are supposed to be, those programs will for a while cause a decline in European spending along with much social unrest. Can China take a double whammy like this without overheating? I think not. And China will have to show things down, whether it wants to or not. ... The "China Story" that most of the world is in love with is nothing more than excess credit finding a home in malinvestments just as happened in the US.
Asia; Begins; canaries; China; China credit; coalminer; Euro Bailout Lovefest; Mish's Global Economic Trend Analysis; participated; real estate bust.
naked capitalism Thu 2010-04-22 18:57 EDT
More Evidence of Lack of Competitiveness of Many Chinese Exporters
...From Bloomberg: The profits of China's makers of household appliances, automobiles and cell phones may plunge by between 30 percent and 50 percent if the Chinese currency were to strengthen by 3 percent, according to a state media report. Small and medium-size exporters with low price-negotiating powers will face losses and may even go out of business, according to the Xinhua News Agency's Economic Information Daily newspaper, citing the results of a ``stress test.'' ... Richard Kline: ...Not that it matters at all for US manufacturing whether the renminbi notches up or not. Because wealth enterprises in the US don't really give a damn about their host country. Low-value added assembly will simply flow to Vietnam, Bangaladesh, back to Mexico, or the like. An industrial policy presupposes a political policy. And the malefactors of great wealth have complete control of US governmental policy, as we see, and not the least interest in investing in their host country. Great wealth here is parasitical, in a word. Fuddling about with currency rates won't change the political equation at all.
Chinese exports; competitions; evidence; lack; naked capitalism.
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.
China Financial Markets Tue 2010-04-20 09:17 EDT
Who will pay for China's bad loans?
...pessimists are starting to worry about excessive debt levels in China, about which they are very right to worry, and many are predicting a banking or financial collapse, which I think is much less likely. Optimists, on the other hand, are blithely discounting the problem of rising NPLs and insisting that they create little risk to Chinese growth. Their proof? A decade ago China had a huge surge in NPLs, the cleaning up of which was to cost China 40% of GDP and a possible banking collapse, and yet, they claim, nothing bad happened. The doomsayers were wrong, the last banking crisis was easily managed, and Chinese growth surged. But although I think the pessimists are wrong to expect a banking collapse, the optimists are nonetheless very mistaken, largely because they implicitly assumed away the cost of the bank recapitalization. In fact China paid a very high price for its banking crisis. The cost didn't come in the form of a banking collapse but rather in the form of a collapse in consumption growth as households were forced to pay for the enormous cleanup bill...
Fri 2010-04-02 19:12 EDT
Shopaholic China: China's Global Shopping Spree: Is the World's Future Resource Map Tilting East?
...anticipating the kind of voracious resource consumption that goes with anticipated future growth, and worried about the availability of adequate supplies, giant Chinese energy and manufacturing firms -- many of them state-owned -- have been on a veritable spending binge when it comes to locking down resource supplies for the twenty-first century. They have acquired oil fields, natural gas reserves, mines, pipelines, refineries, and other resource assets in a global buying spree of almost unprecedented proportions...
China's Global Shopping Spree; Shopaholic China; world's future resource map tilting east.
naked capitalism Thu 2010-04-01 19:57 EDT
Top ten reasons you know China has a financial bubble on its hands
Edward Chancellor, author of the seminal book on financial speculation and manias ``Devil Take The Hindmost,'' is now turning his eyes to China. He sees a number of red flags which point to excess in China...The trouble is that China today exhibits many of the characteristics of great speculative manias. The aim of this paper is to describe the common features of some of the great historical bubbles and outline China's current vulnerability...Is China in a bubble blow-off top like Japan post-Plaza accord? I say yes. I believe anyone who thinks this will not end badly is in for a rude awakening.
Financial bubble; handing; know China; naked capitalism; reasons; Top.
naked capitalism Fri 2010-03-19 15:24 EDT
China's Exporters Hanging by a Thread?
Has the Chinese export sector become hostage to WalMartization, the ability of powerful retailers to squeeze vendor profit margins?...Vice Commerce Minister Zhong Shan, in an exclusive interview Thursday ahead of a visit to the U.S., said that the profit margin on many Chinese export goods was less than 2%. Most exporters absorbed the appreciation in the value of the yuan that followed its revaluation in 2005 by boosting innovation and cutting costs, but many were forced to close, he said. A further rise in the currency's value would endanger more exporters' survival, which China can't afford, he said... ...2% margins on export-oriented businesses is not representative of any sort of real competitive advantage. A real competitive advantage when it comes to exporting would show double-digits profit margins. This whole sector is hanging by a thread...nearly none of the activity China has engaged in since the downturn is secular or self-sustaining.
Mon 2009-12-21 19:18 EST
America's Head Servant? The PRC's Dilemma in the Global Crisis
...Despite all the talk of China's capacity to destroy the dollar's reserve-currency status and construct a new global financial order, the prc and its neighbours have few choices in the short term other than to sustain American economic dominance by extending more credit...the historical and social origins of the deepening dependence of China and East Asia on the consumer markets of the global North as the source of their growth, and on us financial vehicles as the store of value for their savings. I then assess the longer-term possibilities for ending this dependence, arguing that, to create a more autonomous economic order in Asia, China would have to transform an export-oriented growth model--which has mostly benefited, and been perpetuated by, vested interests in the coastal export sectors--into one driven by domestic consumption, through a large-scale redistribution of income to the rural-agricultural sector. This will not be possible, however, without breaking the coastal urban elite's grip on power.
Mon 2009-12-21 18:29 EST
China's Economy: Decoupling from what? - Drorism*
One of the most popular memes repeated by mainstream media since the collapse of Lehman Brothers last year is the idea that China will manage to avoid the consequences economic downturn by shifting from an export-based economy to one based on local consumption...the "decoupling" theory proved to be false: The downturn in the developed world had a significant impact on China's economic well-being, causing a dramatic rise in unemployment and a sharp slowdown in economic growth...A new study published by Professor Hung Ho-fung...compares China's development path to that of other Asian economies, including Japan, Korea, Taiwan, Singapore, and Hong Kong. It provides a concise summary of political and economic events in East-Asia since World War II as well as some colorful predictions and recommendations...
zero hedge Fri 2009-12-18 13:20 EST
Focusing On (And Profiting From) The Upcoming Chinese Financial Crisis
Today's piece of contrarian economic insight comes once again from the strategists at SocGen, this time Dylan Grice, whose piece entitled "Popular Delusions: China's looming financial crisis will provide the next buying opportunity" is somewhat self explanatory. Not surprisingly, Dylan, who quotes the NBER, focuses on the overabundance of cheap credit as the catalyst that will ultimately topple the economy. Mr. Grice's conclusion: buy if you must, but wait for the credit bubble pop.
focused; profits; Upcoming Chinese Financial Crisis; Zero Hedge.
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.
Credit Writedowns Fri 2009-10-23 08:57 EDT
US angling to get Chinese to revalue renminbi
In what looks to be a central line of attack in the quest to re-balance the global economy, the Treasury Department has ratcheted up the rhetoric against China's currency peg. The Treasury's semiannual report to Congress slammed the Chinese for their lack of exchange rate `flexibility,' but stopped well short of accusing the Chinese of currency 'manipulation' as Tim Geithner had claimed...[dollar losing reserve currency status]
Fri 2009-10-23 08:36 EDT
Wake Up Washington! China Is Already Dumping the Dollar Niall Ferguson Says: Tech Ticker, Yahoo! Finance
Harvard Professor Niall Ferguson says Washington D.C. is too complacent about China's ability to wean itself off the dollar...China's "current strategy is to diversify out of dollars and into commodities," Ferguson says. Furthermore, China's recent pact with Brazil to conduct trade in their local currencies is a "sign of the times." [dollar losing reserve currency status]
China; Dollar-Niall-Ferguson-Says; Dump; finance; Tech Ticker; wake; WASHINGTON; Yahoo.
naked capitalism Sun 2009-10-11 17:06 EDT
Asian Countries Intervene to Prop Up Greenback (Dollar Bind Edition)
An unannounced but evidently coordinated effort to arrest or at least slow the fall of the dollar is underway. The Financial Times indicated that Asian central banks were aggressive dollar buyers on Thursday, but the information came via currency traders rather than an official pronouncement. Thailand, Malaysia and Taiwan made substantial purchases; Hong Kong and Singapore also intervened today. The action may also have a secondary objective of rejiggering their currency values versus China's, since China repegged the renminbi against the dollar...
Asian Countries Intervene; Dollar Bind Edition; greenback; naked capitalism; prop.
Ambrose EvansPritchard Finance and business comments Thu 2009-10-08 17:07 EDT
China calls time on dollar hegemony
You can date the end of dollar hegemony from China's decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners. Beijing does not need to raise money abroad since it has $2 trillion (£1.26 trillion) in reserves. The sole purpose is to prepare the way for the emergence of the yuan as a full-fledged global currency. [dollar losing reserve status]
Ambrose EvansPritchard Finance; Business Comment; China calls time; dollar hegemony.
Tue 2009-10-06 21:12 EDT
The demise of the dollar
In the most profound financial change in recent Middle East history, Gulf Arabs are planning -- along with China, Russia, Japan and France -- to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar...Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."...
Tue 2009-09-29 11:14 EDT
Take This Monetary System, Please - Up and Down Wall Street Daily - Barrons.com
The current exchange-rate regime can't go on, but what's the alternative?...As long as China's currency remains joined at the hip to the dollar, the impact of the dollar's weakness ironically is felt more outside the U.S. than within its borders. And to keep that exchange rate stable requires China to continue to accumulate U.S. assets, notwithstanding that nation's vocal complaints about American deficits that it is compelled to fund. [reserve currency]
Barrons; com; monetary System; please; take; Wall Street Daily.
Credit Writedowns Thu 2009-09-17 09:49 EDT
China issues bonds to ``promote the RMB in neighbouring countries''
In the latest move toward China's long-term strategy of internationalising its currency, the Chinese Ministry of Finance announced today it will issue government bonds valued at 6 billion yuan in Hong Kong. [dollar losing reserve status]
China issues bonds; credit writedowns; Neighbouring Countries; promote; RMB.
Credit Writedowns Tue 2009-09-08 15:10 EDT
China to diversify out of U.S. dollars
According to an account published in the Daily Telegraph by Ambrose Evans-Pritchard, the Chinese government is quite anxious about money printing in the United States and the effect this printing could have on China's dollar denominated reserve assets. Dollar losing reserve status; Chinese buying gold.
zero hedge Tue 2009-09-01 15:39 EDT
Head Of China Sovereign Wealth Fund Openly Admits Asset Bubble Addressed By Creation Of More Bubbles
In a phenomenal demonstration of frankness and true economic assessment, the head of the China Investment Council, Lou Jiwei, who controls China's $298 billion sovereign wealth fund, admits the ponzi nature of today's markets: Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose. $20 trillion+ global equity market Ponzi scheme.
bubble; China Sovereign Wealth Fund Openly Admits Asset Bubble Addressed; creation; Head; Zero Hedge.
Jesse's Café Américain Tue 2009-09-01 14:56 EDT
Chinese State-Owned Companies Object to Face-Rippings, Wall Street Indignant
After one too many face-rippings by the merry Pranksters of Wall Street, China's state-owned companies have run to their government to complain about the fraudulent nature of their derivatives contracts. Chinese state firms reneging on fraudulent derivative contracts.
Chinese State-Owned Companies Object; Face-Rippings; Jesse's Café Américain; Wall Street Indignant.