Um... That sounds like a Bible prophecy. .....we see the kings from the East which will number 200 million men crossing a dried Euphrates River....
closing factories would be more worrisome to the Chinese than the US debt.... social unrest is the #1 threat to China. nothing under the govt shield is getting closed, but until the stimulus it looked pretty grim.
Whenever I read in Western media that Chinese lending is "recovering and is gonna lead the world out of this mess" bullshit I laugh my ass off. The loans made by Chinese banks are mainly directed to government cronies who never intend to pay them back. You will only get a suitable loan if you have close connection to the government or you have relatives in the bank. It's another layer of corruption. Honest businesspeople get loans from Hong Kong banks that are serviced properly. Talking about a bad debt problem 3 times larger than the entire subprime problem we have here! Now that's a time bomb waiting to explode. But even if it does the government will cover it up so well that few people will notice. Some of the permabulls on China are just laughable. It's the next bubble after dotcom, real estate, and oil.
There is an expression - If you owe the bank a million dollars, they own you! If you owe the bank a billion dollars, you own the bank! Nearly 20 years ago I found myself in a similar position, I took on 2 large projects for one of my largest clients whilst expanding my construction company. What I didn't know at the time (because nobody shows you their balance sheets, just as China doesn't show it's true position)they were extremely weak and relying on these projects to pull them out of the shit. Their cashflow got crunched due to the developer expeirencing financing issues and their due debt to me ballooned, unfortunately by this stage I was in too deep, I couldn't get out because they owned me - everything still had to be paid, wages, hire equipt etc. My house, investments, company assets, borrowings, effectively the client owned everything because I couldn't get them back. When the hammer came down and the client went into receivership I was screwed, everything gone. I had to go to my creditors and negotiate repaying them over time, it took me the best part of 2 years, I had plenty of time to consider the issue of ownership. The US owns China! If the US falls over China falls as well, this gives the US incredible leverage. Regards Johno
who is China's largest trading partner? Europe. Who is Japan's largest trading partner? China. Who is Europe's largest trading partner? Most trade is facilitated between EU countries. Who is Brazil's largest trading partner? China. Who is India's largest trading partner? China. Which other countries matter in word trade? The US, but it has lost a lot of its edge. Where in this equation does the U.S. actually appear? This points to the fact that some of you guys really have missed the better of the past 5-10 years. Sure, other parts of the world are in trouble if the US gets downgraded (which is a matter of time only) but I have never heard that a defaulted entity (I dont suggest the US defaults) is in better shape than its creditor. So far none of the guys who stubbornly believe in China's demise have brought forward any reliable sources nor proof for their claims. Fact is China still enjoys one of the largest trade surpluses in the world something the US would prostitute itself for to have. I have also never heard of a country bathing in surpluses and at the same time being at the brink of bankruptcy. Seriously, all the anecdotes and personal emotions aside are there any points for which you can provide a solid back up?
It's 2.30am I have to go to bed but I will leave you with a thought. The man who begins with certainty will end in doubts,and The man who begins with doubts will end with certainty. Maybe you are just playing devil's advocate or maybe you truely are as dogmatic as you present, who knows, but either way it won't affect me as ultimately, at some point, we all get to take responsibility for ourselves. Regards Johno
I'm with asiaprop on this. First off, let's tackle the issue of Chinese consumption. Yes, since Chinese consumers save 45% of income compared to 5% in the US, so their consumption is only 55% of income compared to 95% in the US. However, that is not a bad thing in the slightest for China. Higher savings rate naturally translate into higher investment rates and faster productivity growth, which leads to faster consumption growth over time. In fact that is exactly what we are seeing. A quick and dirty way to measure consumption growth is to look at new cars sold. In the US, this is down 40% yoy. In China, it is up about 5% yoy. In the US, long term average auto consumption growth is about 2% yoy compared to 9% in China. China's trend in taxes and regulation has been downward the last few decades compared to upwards in the US. Property rights have been strengthening in China. Tariffs and quotas have been falling for decades in China. Taxes on capital gains and investments are lower in China than in the US now. Education consumption is sharply increasing in China which bodes well for its workforce long term as China moves up the value-added chain and begins to compete not just in manufacturing but R&D. A strong middle class is forming in China. Capital markets are expending in China, with new futures exchanges, options markets, and currency trading mechanisms slowly but surely taking form, first to a few in-house and select trading firms but eventually open to everyone. The Yuan is in the process of a slow float (depeg vs USD) as well as being made more convertible over the next 10 years. Manufacturing has certainly taking a massive hit, but in my opinion we will see a full recovery in China in both manufacturing and consumption with new highs in both being set in under 18 months. China certainly faces its share of problems, but I believe we will see sustainable, rapid productivity growth in China for at least another decade or two. The US and UK on the other hand, will most likely see rather sub-par growth in productivity the next decade imo, with most other countries somewhere in between but closer to US/UK than China in terms of productivity and standard of living growth. The reason for the sub-par productivity growth in the US is the inefficiency of government policy; specifically the distortions caused by the bailouts, the US health care system, and too low a savings and investment rate compared with the greying population. I believe the US and UK will experience the equivalent of Japan's "lost decade" the next 10 years, compared to China's economy more than doubling its productivity.