Hedge Fund Manager Hugh Hendry wakes around a major Chinese city, and give us his take on what he believes is the real state of Chinese real estate, and the hints they give about the overall economy, in early 2009. www.eclectica-am.com [video=youtube;ektMQGbW3wk]http://www.youtube.com/watch?v=ektMQGbW3wk"[/video] And the largest mall in the world, which is more of a ghost town: http://video.pbs.org/video/1218530801/program/1154485580
You gotta hand it to them for pulling off 30 years of 8-10% growth. And CCP shrewd enough to not mess with what works. http://www.forbes.com/2010/01/11/china-bubble-chanos-leadership-managing-rein.html Jim Chanos Is Wrong: There Is No China Bubble Shaun Rein, 01.11.10, 03:53 PM EST He misunderstands basic facts about income, real estate and the currency there. pic More from Shaun Rein The famed short-seller Jim Chanos has been making waves lately by saying he thinks China is in a bubble and ready to collapse in 2010. He argues that easy credit has let real estate and stock market prices shoot upward. He also says the Chinese government is cooking the numbers to show 8% growth in gross domestic products, when actually China can't keep growing when the rest of the world has been hit so hard by the financial crisis. Chanos called it right on Enron and Tyco ( TYC - news - people ) before they collapsed. He is no lightweight observer of the economic scene. However, he is wrong about China. For once I agree with the famed investor Jim Rogers, who cofounded the Quantum Fund with George Soros. He says China is not in a bubble and adds that he finds "it interesting that people who couldn't spell China 10 years ago are now experts on China." Article Controls Betting against China in 2010 is a bad mistake for investors and companies alike. Here are three reasons why Chanos is wrong and Rogers is right about the strength of China's economy: Chanos' first error is his belief that China's real estate sector soared in 2009 because of speculation triggered by a loosening of credit by China's banks. Lending in China doubled to $1.35 trillion in the first 11 months of 2009. Real estate prices rose sharply throughout the country and almost doubled in cities like Shenzhen. Chanos calls that a bubble--"Dubai times 1,000--or worse"--that could lead to fallout like the subprime mortgage mess in the U.S. There are, however, fundamental differences between China's real estate and consumer finance markets and those of the U.S. and Dubai, which Chanos compares them to. First, when buying residential properties, consumers in China have to put down 30% before taking out a mortgage. For a second home, they have to put down 50%, no matter what their net worth. Therefore, China doesn't have the reckless consumer behavior that occurred in the U.S., where people with bad credit were taking out huge loans from Countrywide with no money down, or were buying 10 homes without deposits in the hope of flipping them in a few months. People who buy homes can afford it. Also, mortgages are not being spliced up and packaged and securitized by the likes of Citigroup ( C - news - people ) and Bank of America ( BAC - news - people ). Instead mortgages are held by the original lenders, the way they were in the U.S. before financial innovation and lack of regulation broke down the old rules. Related Stories The Chinese government also has no qualms about overseeing the market and has not been run by Ayn-Rand-loving free marketers like Alan Greenspan, who seemed to believe that no government intervention at all was best. The Chinese government is gravely concerned about social stability because of the widening gap between the rich and the poor. It is therefore limiting the sizes of new apartments and restricting the construction of stand-alone luxury villas. (Most people in China's urban areas live in high-rise apartment buildings. I myself live in a 60-story building.) The government is also forcing developers to build low-income housing. And to prevent flipping and excess speculation, it is heavily taxing sellers who unload their properties within two years of buying them. The real estate business to be concerned about is commercial building. There has been way too much construction of large office towers, especially in Shanghai, which is gearing up for its World Expo this year. Too many gleaming skyscrapers sit empty of tenants. The glut of office space has already caused rental prices to drop in places like the Shanghai financial district, Pudong. Too much leverage, not high prices, caused the problems with real estate in Dubai and the U.S. There just isn't that much leverage in China. So even if prices are too high, a drop of as much as 20% or 30% wouldn't cause anything like the tsunami that hit the American and Dubai markets. The second way Chanos is wrong about China is that he, like most economists and Wall Street analysts, underestimates income there. I have recently been debating several Harvard economists who worry that incomes haven't risen as fast as GDP in China. They argue that it shows that too much of China's growth has been a matter of government investment in unsustainable infrastructure projects like bridges and highways, as happened earlier in Japan. They point out that Chinese consumers account for just a third of the economy in China, vs. two-thirds in the U.S. However, my firm, the China Market Research Group, estimates that Chinese consumers will come to account for half of the economy within the next three to five years as the role of exports diminishes. (See my "Three Myths About Business in China.") If anything, incomes are grossly underreported in China. A simple look at how accounting works will show why. Whereas in the U.S. individuals must report their income to the Internal Revenue Service every year, in China all individual tax is reported and paid for by companies, except for that of high earners. Many Chinese companies limit the tax they pay by reporting low salaries and then paying their employees higher amounts while accounting for the difference as business expenses like phone bills. The employees are happy because they make every bit as much as they were promised, and the companies are pleased to lower their tax exposure. Also, many companies pay for housing and cars for their employees, a holdover from the old system of state-run businesses. Most Western economists don't count those expenses as income, but they should. Deceptive accounting of income is so widespread that the government has announced plans to tax some business expenses in state-run enterprises--the kinds of expenses that let executives pay taxes on earnings of $300 a month while living in multimillion-dollar homes and driving Mercedes. The third thing Chanos gets wrong about China is the notion that the yuan is likely to appreciate. In the short term, it would be disastrous for China to let that happen, as I wrote in "Why Krugman Is Wrong About The Yuan." It would cause China's exports to plunge, swell the Chinese unemployment rolls by millions, and destabilize the financial system. In the long term, however, once the world's economy stabilizes, appreciation of the yuan might make sense. Getting exposure to Chinese assets now would benefit an investor when that time comes. Chanos has an excellent track record in divining the future. However, part of his job as a short seller is to make money by causing markets to question good things. That can be useful for keeping companies honest and in check. But in this case he clearly doesn't understand the economic system he's talking about. China is not in imminent threat of collapse, and investors and companies are wise to stay involved with it, as Rogers argues. Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm. He writes for Forbes on leadership, marketing and China. Follow him on Twitter at @shaunrein.
Here's another nitwit wet dreamer..hehe First he does not know that exports are only 17% of China's GDP. The slack from the global recession was picked up by the stimulus. He also does not acknowledge that the proportion of the stimulus to GDP compared to the US was much, much larger and that the stimulus money also had a much more direct affect on China's economy than the US stimulus. Instead he fabricates some totally idiotic scenario that requires China to have completely retooled its economy in order to achieve the numbers it reported. He also mentally masturbates furiously about the Chinese bubble, but he can't have his cake and eat it too, because a bubble implies growth, even if it's abnormally fast, and yet he claims China's growth is a fabrication. You're either lying about your growth or you're growing unsustainably fast, but how do you have both? There have been other morons like this loser predicting doom on China for years. I remember another moron several years ago claiming that China was lying about its growth because supposedly its energy consumption growth was not matching its GDP growth. And of course there's Gordon Chang who predicted the "collapse of China" that was supposed to happen a few years ago. So this moron wasn't the first, and he won't be the last. But China is still here, it's still growing, and I have little doubt that each of these nitwits will fall by the wayside as their stupidity is revealed and they swell the ranks of the Naysaying China Moron League. [video=youtube;SSuUM3Abe00]http://www.youtube.com/watch?v=SSuUM3Abe00"[/video]
I mean whats the big deal. The US is responsible for the biggest criminal mismanagement in the history of capitalism. All that the FEDs are doing now is printing money to tide over their biggest fug up in the history of fug ups. The ENTIRE US monetary system now is a bubble. That madness have been spreading across the world and should a real correction take place as it should be, the entire global financial system would simply collapse. Have it not been for China to continue to power the world economy and right now it is the few players in the world to have actual real growth in terms consumerist power and businesses that are backed up by real, real estates and infrastructures, the global economy would have been in a more severed state of decay that is already is. Don't thank China. Blame the US for the crap so called Capitalist model that have been perverted and mismanaged. If there are real controls and true freedom of market information as propounded by the fathers of capitalism, the present state of the US economy won't be in such a severe state of performance.
This Fitch dude is another China-hater. Weren't Chinese banks corrupted already? Go to find the largest banks in the world by market value. These racist whites always exaggerating. Also Chinese economy has been collapsing for 60 years. US financial system is most stable. That's all we were told, lol Feb 3, 2010 FITCH WARNS CHINA BANKS 'Big bubble risk' Two women sit in front of the city's skyline in Shanghai on January 25, 2010. -- PHOTO: AFP SHANGHAI - FITCH Ratings warned on Wednesday that banks in China face the greatest 'bubble risk' of any Asian country, one day after it downgraded two mid-sized Chinese banks due to the rising threat of bad credit. The agency's comments in an Asia-wide assessment of the banking sector come as concerns mount that Chinese banks may be headed for trouble over bad debt after a record lending spree last year. 'The agency views 'bubble risk' as greatest for Chinese banks given their 32 per cent loan growth in 2009; this looks likely to be followed by a further 20 per cent in 2010,' Fitch said in a statement. 'Credit growth of more than 50 per cent over a two-year period in an economy where bank credit is already quite large relative to gross domestic product almost inevitably involves some misallocation of credit,' it added. New loans extended by China's banks nearly doubled in 2009 from the previous year to 9.6 trillion yuan (S$1.96 trillion) as banks heeded Beijing's calls to pump up lending to keep the economy growing. Fitch however noted the limited transparency of Chinese banks and said their tendency to reschedule loans meant any bad debt problems would surface slowly. 'Chinese banks are less well-placed, compared with Asian peers, to deal with potential problems given that rapid loan growth is weakening capital ratios that are already relatively low,' Fitch said. -- AFP http://www.straitstimes.com/BreakingNews/Asia/Story/STIStory_485843.html
More on fanciful real estate in China. The truly unfortunate thing about Beijing, was that hundreds of years worth of historic Chinese structures were torn down to make way for what became the Olympics site; entire neighborhoods literally disappeared overnight. That IMHO, was an evisceration of Beijing's soul for a brief moment of good face. Part of what makes China so great is its unique ability to trace a continuity of culture through nearly 5000 years of history. But in it's race for "progress" the modern PRC often undermines it's own historic identity. For a quick synopsis, just read the RED LINES. ***Sidebar*** Note: Readers may notice responses from two other forum users (A4Agent & Mobidoo). In other threads, both have attacked me personally and had proven themselves to be race baiting nationalists who's views aren't even worth the time to read. Thus, I have kill filtered their text; other than knowing that they have responded, I don't see or care what they write.
7 Reasons China Will Lead the Global Economic Recovery By Sid Riggs Contributing Editor Money Morning The recent 21% tumble in the Chinese markets had investors around the world bailing out of China as fast as they could. But, this sell-off actually created one of the biggest buying opportunities of a lifetime. Here’s why China is poised to take off – and how to cash in as China leads the global economic recovery. August 2009 was one of the worst months ever for the Chinese stock market, with stocks dipping 21%. But the major sell-off wasn’t based on any fundamental news – it was a case of frightened investors worried that China is the next bubble. The truth is, China’s fundamentals are sound. Chinese consumers are accelerating their purchases, exports are growing and Chinese GDP is on track to grow 7.9% by year-end. This is no bubble – Chinese stocks don’t have anywhere to go but up. Don’t let western bias fool you. It is not the U.S. that will lead the global recovery – it is China and other emerging economies. China’s markets are for real – and so are the returns. Over the last five years, China’s markets have returned over 100% – even after the massive sell-off caused by the global financial meltdown. Over the same time period the S&P has actually lost money. This is just the beginning. This report will show you seven reasons the Chinese economy has nowhere to go but up – and how to profit. 1. Incredible GPD Growth Driving Returns On July 15, 2009, China’s National Statistics Bureau affirmed what we’ve expected all along. China’s 2nd quarter GDP came in at an impressive 7.9%. Recently, HSBC China economist Qu Hongbin went a step further, forecasting that the Chinese economy will grow 8.1% this year and expand to 9.5% in 2010. The increasing GDP numbers reflect that China’s recovery is much broader and more robust than most western analysts originally gave the red dragon credit for. This impressive growth comes not only from China’s massive $586 billion fiscal stimulus package, but from strong growth in consumer demand. 2. China Can Stimulate Its Economy Without Going into Debt While the U.S. has had to print trillions of dollars to attempt to stimulate its economy, China’s story is much different. With $2.3 trillion dollars in reserves, China has been able to strategically stimulate their economy -without having to deficit-spend to do it. Even though the $586 billion Chinese stimulus package passed in November 2008 represents a whopping 16% of the country’s GDP, China hasn’t had to go into debt or print money like the U.S. did. This gives China an incredible opportunity to shore up the economy without damaging its future economic prospects. 3. China is Funding Global Growth When the International Monetary Fund (IMF) announced they were considering issuing $50 billion in bonds to better finance aid to countries struck by the global financial crisis, they turned to China to purchase them. How times have changed. Two decades ago, the IMF would have been calling the U.S. to help fund the recovery. But with the U.S. economy crippled, China is the only industrial economy in the world that has enough reserves to actually do anything. Of course, China’s willingness to assist the IMF is both humanitarian and shrewd. As IMF Managing Director Dominique Strauss-Kahn said, “The crisis is certainly an opportunity to reshuffle the IMF’s governance, to see the new balance of powers in the world.” Clearly, China’s extensive reserves give the country the opportunity to exert its power over the entire new world economy. 4. China is Moving the World Away from the U.S. Dollar Not only is China taking advantage of its economic strength to gain leverage in the IMF, it is also pushing for a move away from the U.S. Dollar as the world reserve currency. As the largest holder of U.S. dollar reserves in the world, China has a lot of reasons to be concerned with the value of the U.S. dollar. Chinese officials are watching very closely as Washington desperately spends to resuscitate the U.S. economy. In an effort to diversify away from the U.S. dollar, China has been buying gold, oil, and other dollar denominated commodities necessary for its growth. If the value of the U.S. dollar declines, the value of China’s new assets will increase. In one easy step, China has not only helped its strategic growth, but it also created a hedge against Washington’s shenanigans. 5. China is Creating a Marketplace for its Currency Since December 2008, China’s central bank has signed bilateral currency swap agreements with six different countries – including Argentina, South Korea and Indonesia – worth $95 billion dollars. The countries that participate in these swap agreements can use Chinese yuan to buy goods and services in China. With these agreements, China has created a market for its currency without ever having to put it into the open market. China will likely continue to extend these swap agreements with as many countries as it can, until one day the world wakes up and realizes China has created a global marketplace for its currency without playing by the rules. 6. China Has Room to Grow While we in the West grapple to keep up our inflated standard of living, China still has plenty of room to grow. Annual per-capita income in China is only $6,000 – compared with $47,000 in the U.S. The sheer size of China (1.3 billion people) and its increasing prosperity is an enormous force that can’t be ignored. Remember, China is not some backward third world economy. It is currently the third largest economy in the world. China’s economy will surpass that of the United States by 2035 and be twice its size by mid-century, according to the Carnegie Endowment for International Peace. 7. Global GDP Growth is Shifting East As the global markets begin to mend themselves we will see global GDP share move from the west to Asia – led by China. The U.S., Canada, and Europe will only account for 49.4% of global economic output in ‘09, according to the Center for Economics and Business Research. Not only that, Western economies will decline to just 45% of global economic activity by 2012 – far ahead of the original estimates that predicted the West wouldn’t fall below 50% until 2015. As China’s share of global GDP rises, so does its share of the global markets. From the end of 2003 to the end of July 2009, the NYSE’s share of global market cap shrunk 29%, according to the World Federation of Stock Exchanges. Over the same time, the Shanghai Stock Exchange increased its share of global market cap by 636%. In addition, by 2020 – just 11 years from now – China’s share of global consumption will be equal to that of the United States. That’s what happens when you introduce a prosperous economy to a population of 1.3 billion people. How to Invest in China: Not all Chinese companies are created equal, so we prefer using ETF’s to play the entire trend instead of choosing any individual companies. Remember, the ride won’t be straight up – China will have hiccups. But, we are staring at the leading edge of the investing opportunity of a lifetime and you don’t want to be left on the sidelines. One of the most popular ways to invest in China is through iShares FTSE/Xinhua China 25 Index (FXI), but I prefer PowerShares Golden Dragon Halter USX China (PGJ). PGJ has a more broadly diversified portfolio of companies and sectors, with no more than 28% of the entire holdings in any one sector, and no more than 5.46% of the entire holdings to any one company. FXI on the other hand, has concentrated 51% of their entire holdings in the financial sector, and as much as 9.3% of the entire holdings in one company (China Construction Bank Corporation). That may prove be to genius over time, but as a measure of the entire Chinese market, we feel PGJ offers better diversification. If you like income, take a look at Templeton Dragon Fund Inc. (TDF) which is yielding 6.8%. Managed by legendary emerging markets fund manager Mark Mobias, TDF is a closed end fund focusing mainly on China (58.4% of holdings), but also on neighboring Hong Kong and Taiwan (29.9% and 11.4% of holding respectively). If you have the stomach for more a little more risk, look at Claymore/AlphaShares China Small Cap (HAO). The name “small cap” may be a little misleading. This fund is more of a blend between mid-cap and small-cap stocks. The fund is very well diversified between the different critical sectors in China and no single company represents more than 2.6% of the entire funds holdings. http://www.moneymorning.com/2009/10/15/chinal-economic-recovery/
Ah, these people know what they are talking about. Can't make China revalue their currency as one guy say,"They are the biggest dog in the room" They will do whatever is necessary to balance their economy. And one guy is right, keeping your mouths shut is the best way to get Chinese cooperation. http://www.cnbc.com/id/15840232?video=1424972286&play=1
