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I remember reading somewhere that china requires 8% growth just to provide enough jobs for those coming out of school and into the workforce.
Exhausted the low hanging fruit is one way to put it. They have started talking about the new norm, i.e.about 7% per year.
They have been mis-allocating capital on a huge scale, and the pollution isn't helping. Dunno, started this thread years ago now, so can't really claim any kind of precognition if anything bad happens.
I remember reading somewhere that china requires 8% growth just to provide enough jobs for those coming out of school and into the workforce.
Not to mention all the non-performing loans still hanging around in China. And there are lotssssssss of them. They just transferred them to subsidiaries and passed a law saying they don't have to be repaid for 20 years so they aren't technically on the banks books.
But they don't do that anymore. They've changed their ways. They promise.
Given their demographic implosion, they don't have to keep it up for too long.
http://nationalinterest.org/blog/the...r-coming-11353
Given that and the pollution, they will be hard pressed to keep up their economic growth rate even at 7%.
To China's credit, the OP was written in 2011, and the impending bust is still impending...
On the other hand, while there would be some turbulence here in the US, I think in the long run, it would actually help the economy.
History might not have to repeat itself, but sure does it. For the last 25 years, the global economy has lurched from one big housing bubble to the next. First it was Japan, then it was the U.S. and Europe, and now it's the rest of Asia.
You can see that in the chart above from Nomura. Since the end of 2008, housing prices across Asia have, for the most part, tracked those in the United States during its bubble years. That's because money poured into those countries in search of better—or really, any—returns right after the crisis, and, more often than not, it found its way into the property market. Now some of them, like Korea's, barely went up at all. But that was an outlier. China, Taiwan, and Malaysia's housing markets have all risen, and now started to fall, in not quite perfect, but still close sync with the U.S. market circa 2005. And Hong Kong and India's prices have galloped a lot higher than even that.
Now a bubble isn't a bubble unless it bursts. Until then, it's just a boom. So the question is which these will be. Hong Kong's housing market has such limited supply that it seems like it could go up indefinitely. But the others, well, they're looking a little more wobbly. The problem isn't just that they're probably overbuilt, but also that the Federal Reserve is getting ready to tighten policy. Higher rates in the U.S. will suction up a lot of the money that had gone overseas looking for higher returns, because now it'll be able to get them here. That'll put even more pressure on Asian economies that were already starting to slow down as housing prices did, with the result that prices might fall even more. There's a real risk that could turn into a vicious circle of lower prices and more defaults that even zero interest rates wouldn't be able to turn around. Sound familiar?
But it's even worse in China because of their dollar peg. It's hard to believe, but after decades of manipulating its currency down against the dollar, China now has to prop it up. That's because so much money is leaving the country that the yuan "wants" to weaken. That means China not only has an overvalued currency that's hurting exports, but it also has to shrink its money supply—right when it needs a bigger one—that's hurting the rest of its economy, all so it can keep it overvalued. That sound you hear is the air rushing out of its property market.
Anyone think this time is different?
http://www.washingtonpost.com/blogs/...ng-bubble-did/
THe problem with calling China is that they have had to build housing for 300M people in their cities. Trying to actively or quan atively compare a mature economy like the US to one that is undergoing a lot of systemic change is a fools errand, IMO.
Skyward march
Efforts to stimulate the economy risk stoking an already blazing stockmarket
http://www.economist.com/news/financ...lready-blazingJUDGING by its stockmarket, China is awash in cash. Trading is so frenetic that on April 20th, volumes surpassed the limits of the software that tracks transactions. More than 1.1 trillion yuan ($180 billion) of shares swapped hands that day, but the Shanghai Stock Exchange’s counter remained stuck at 999.99 billion. It is only a matter of time before this happens again. Investors are opening more than a million new trading accounts every week, chasing returns on a market that has doubled over the past year.
Despite this frenzy, the central bank acted this week to pump money into the financial system. By cutting the portion of deposits that banks must hold as reserves, it freed some 1.3 trillion yuan for new lending. Why inject cash when the stockmarket suggests China is not short of capital?
Ish. I just wonder how sustainable some of the things they do really are. Going to give up calling it, but there just seem to be a lot of risks running around that their government is either encouraging, ignorant of, or looking the other way at.
(edit) a bit more perspective:
It is also worth remembering that the stockmarket in China marches to the beat of its own drummer more than in most countries. From 2009 to 2013, when China was the world’s fastest-growing big economy, its shares languished among the world’s worst performers. Its stockmarket is still relatively small: even with the bull run, its total value is still barely 50% of China’s banking assets, compared with 150% in America. This means that a big drop would have a less severe impact on the health of the economy. And the manic rally partly reflects a massive portfolio reallocation as savers shift money away from bank deposits and property into stocks.
Nevertheless, it would be unwise for regulators to turn a blind eye to the excesses. With a big jump in borrowing to buy shares, the stockmarket is beginning to affect broader financial stability. China needs to develop more mature capital markets so that firms can raise more money directly from investors, taking some of the burden away from banks. A wild stock rally followed by a crash, as happened in 2006-07, would be a grave setback
"With a big jump in borrowing to buy shares, the stockmarket is beginning to affect broader financial stability"
sounds EXACTLY like the USA, with the Fed ZIR pushing the cost of borrowing (to buy stocks on margin) way down while screwing bond buyers, savers.
QE has caused a stock market bubble, just as the banks that run the Fed wanted all along.
China keeps pumping even with 7% annual growth because they have to keep hitting 8% to have enough jobs generated to employ the new entrants to the labor force out of high school and college. They understand that a pissed off unemployed general population is bad for what is essentially still a dictatorship.
china puts out fake stats man, even if they build 300m new houses, whose going to buy them?
look at the ghost cities/towns....
Exactly. Those are bizarre.
Funny, those houses/condos were bought as investments. Prices were rising fast and many middle class investors chose real estate instead of stocks. In retrospect probably a bad decision but it was a boom just like the dot com and real estate bubbles in our economy.
Funny, those houses/condos were bought as investments. Prices were rising fast and many middle class investors chose real estate instead of stocks. In retrospect probably a bad decision but it was a boom just like the dot com and real estate bubbles in our economy.
As Americans we have a hard time wrapping out heads around the Chinese population numbers. They have more than a BILLION more people than we do, many millions who still want the "good life" of urban manufacturing jobs.
now those same chinese turds are propping up other well established middle/upper class suburbs where property prices have sky rocketer out of a normal persons reach of that dream of owning a house...
even if you raise stamp duty taxes on the purchases, still wont put a dent into their purchasing power.....there are more millionaires in china then the population of australia.....just like all commie countries, those middle/upper class people who have assets/wealth are always looking at investing their money into westernize countries to protect their assets, cause nobody trusts a commie
The people moving from the country to the cities. Just like what happened in every other industrialized country. Nothing magic.
http://www.bloombergview.com/article...k-in-the-1990sAccording to data assembled by visual capitalist, China consumes 54 percent of the world’s aluminum production, 48 percent of all copper, 50 percent of nickel, 45 percent of steel and 60 percent of concrete. It has “consumed more concrete in the last three years than the United States did in all of the 20th century.”
In terms of energy, China uses 49 percent of the world’s coal, 13 percent of the uranium and 12 percent of oil. It’s the same with food: 30 percent of the world’s rice, 22 percent of its corn and 17 percent of wheat.
China was one of the big reasons for the commodity surge in the 2000s. The country's growth has now been cut in half, and that's why prices are now back to the levels of the 1990s.
Baltic Dry Index at all time low. Bumpy transition to consumer economy in China:
http://www.nakedcapitalism.com/2016/...ina-trade.htmlPrivate equity clearly has more money than it can deploy sensibly.
One sign was its enthusiasm for energy plays. It’s hard to imagine an investment more out of synch with the classic private equity formula of steady cash flows and solid customer franchises. Fracking, one of PE’s recent targets, is highly capital intensive, and the sellers are at the mercy of price swings in a highly volatile end market.
Apparently the private equity crowd fell for the sales pitch of the oil & gas crowd, and convinced themselves that energy prices had nowhere to go but up. Oops.
Similarly, some private equity firms seem to have believed the China hype, that the emerging superpower’s trajectory was inevitable Yet as we’ve stressed, no major economy has made a smooth transition from being export-led to consumer-driven. And for those who were watching China, there were signs in addition to the commodity price declines that all was not well. For instance, about 24 months ago, imports of almonds, a favorite of the emerging middle classes in China, fell abruptly, a sign of consumer retrenchment.
The Financial Times discuses today how tanker charter prices have collapsed, and the Baltic Dry index is at the lowest level since it started to be published, in 1985. Needless to say, the news of the day, that manufacturing indexes in China have weakened for the 10th straight months. Stock prices fell over 7%, enough to trigger a trading halt for the balance of the day under new circuit breaker rules.
Mind you, even by the standards of the highly cyclical shipping business, the current state of affairs is dire. From the Financial Times:
China’s slowing growth and a glut of ships have hit earnings for vessels carrying coal and other dry bulk commodities so hard that owners face forced sales, emergency capital raisings and possible bankruptcy.And private equity made this debacle even worse than it had to be by adding to capacity at the peak:
Charter fees are not covering vessels’ operating costs, let alone their financing, in the latest bad news for the many private equity firms that have invested in the sector.
Short-term charter rates for Capesize ships — the largest kind — were as low as $4,897 a day on December 23, down from more than $20,000 a day in August. Vessels typically cost around $13,000 a day to operate and finance.
The slide partly reflected growth in the dry bulk fleet as vessels ordered in late 2013 and early 2014, many with private equity funding, were delivered. The net capacity of the world dry bulk fleet grew 3 per cent in the first 10 months of 2015, despite a e in the number of older vessels being scrapped following the slump in rates.And it was not as if this problem was not foreseeable. The Financial Times warned early last year that the private equity strategy was wrongheaded, that if it were to invest in tankers at all, investing in older ones rather than new capacity would have been sounder. Since the shipping industry is not a major beat for the pink paper, it’s not hard to imagine that insiders had been giving warnings privately even earlier. From the 2015 story:
One of Greece’s highest-profile shipowners has warned private equity firms they risk “destroying” markets if they continue to finance new vessels, after excessive deliveries have driven down cargo rates.And as the new story details, low oil prices have further whacked charter rates by reducing transit times and hence lease terms:
Private equity, which until the past few years was only a minor contributor to shipping finance, has invested at least $5bn in shipping every year since 2010 and funded about 10 per cent of deals.
The cash rescued many companies after the collapse in rates and banks’ growing caution towards shipping lending after the financial crisis.
However, much of the new capital was used to order new vessels at cut rates from desperate shipyards, rather than buying existing vessels from other shipowners.
The crisis has been made worse by the low oil price. As the price of fuel has fallen, charterers have ordered many shipowners to speed ships up instead of operating them slowly to save fuel. Michael Bodouroglou, chief executive of Paragon Shipping, an Athens-based, New York-listed dry bulk shipowner, said the increased speed was making the oversupply problem worse by increasing the fleet’s carrying capacity.Conditions are so lousy that major players, including public companies, are selling ships at distressed prices to raise cash. Monarch Alternative Capital and Oak Tree Capital have large stakes in two of the public companies that are under duress. And given that these deals were levered, you can expect the related debt, which probably at least in part wound up in private equity credit funds, will also show losses.
Eyup.
China is going to have to fill those apartments and condos now.
They have been reluctant to drop prices due to oversupply and therefore have to take a paper loss, but at some point the borrowed money will have to be repaid back.
... and it continues to be volitile.
Their stock market is still not as large relative to other things, but recent government moves have really undermined investor confidence in China's investment environment. The governments instincts are proving to be their undoing.
That is going to hit shippers hard. The article is not exaggerating the doom and gloom at all, IMO. It is really that bad and going to get worse.
The slowdown in shipping will effectively nix the proposed Nicaragua canal.
http://www.theguardian.com/world/201...chinese-tycoon
Good news for shipbreakers though. A lot of older ships with high costs are going to be sold off, IMO.
new ships will be mothballed/stored, but old ships will be sucking wind.
Again, noted here is another structural problem for the Chinese economy, an aging population with low/no social safety nets.
http://www.economist.com/news/china/...ia-state-minds
The consumers China is counting on to drive their economy, are going to be paying for Bao-Bao and Yea-Yea's infirmity and old age health care costs.
After I posted the above, I found this thumbing through news about UBS:
World trade is so bad that cargo ships are being scrapped at double the 1986 record rate
http://www.businessinsider.com/balti...16-2?r=UK&IR=T
Analysts at Deutsche Bank led by Amit Mehrotra have been watching the fall [of shipping prices] closely. The drop has been so bad that ships are being scrapped faster than they are being built. Here are the main points in a recent note (emphasis ours):
Total dry bulk capacity declined by almost 1M tons (net) last week as the pace of deliveries slowed and scrapping remained elevated.
Around 16 ships were sold for scrap last week totaling 1.6M tons. This more than offset 9 new deliveries, translating to a net reduction of 7 vessels.
Last week's scrapping would represent an annualized pace of 11% of installed capacity, which is almost double the all-time high of 6.3% set in 1986.
Year-to-date scrapping is up 80% versus same time last year.
makes sense that killing coal would harm the dry bulk shippers. On top of that China has quit devouring world commodities, iron ore, copper, etc. Australia being a commodity based economy is getting killed by the China slow down.
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