Steve Hanke from Johns Hopkins and the Cato Institute sent this to me. It is a collection of opinions of what might happen if in fact there is an asset bubble in China and what would happen if and when it pops. If you are interested in China at all it is worth the read. This is a highly readable presentation.
And yes, I do think it is a bubble.
http://www.funnyeconomist.com/ChinaBubble.pdf
1 comment:
This is the opinion of an unemployed 27-year old shoeshine boy from Germany.
China is in big trouble
-------
1) Food Price Indices
-> Floods in Thailand, Pakistan, Vietnam, Australia
-> especially cooking oil (<- important for the Chinese kitchen)
-> speculation
2)The Queensland Flood
-> shortage of australian coal (<-BDI)
-> Coal; Iron ore price
-> steel mills
-> megawatt load must be reduced
3)Inflation is still rising
-> Part of the QE of Mr. Bernanke
-> Chinese Officials warned of QE II.
-> Brazil is worried about a starting trade war.
-> Also part of mismanagement by locals
-> Analysts fear of double digit inflation
<- Yuan appreciation
-> money is poured in
-> Locals are worried
-> PBOC is worried
-> Communist Officials get rid of their own food reserves to cool down prices.
-> highest security level since 1989
-> keep in mind their strong and insecure reaction with nobel prize winning Liu Xiaobo.
4)Low consumer market
-> Still low GDP per capita
-> many shopping malls are not used for shopping - instead they are used for amusement and relaxation.
-> Consumer price index rose lately (<- inflation in food prices)
5) Low profit margins
Many companies only have low profit margins.
-> appreciation of Yuan
-> Loans cannot rise.
6) Housing market bubble
-> 60 % of GDP (according to the IMF)
-> Concrete market
-> Steel market
<- Brazil and Australia (which sits on its own housing bubble)
----
I warned people now for weeks, but nobody is listening to me. It's frustrating. Even though I might be wrong about certain aspects, wrong about the outcome, but still people could at least consider a risk or two. But they do not listen to shoeshine boys these days. It's a cassandra moment for me and it is very depressing.
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