My China Thesis Entitled... The Biggest Lie Ever Told

Discussion in 'Economics' started by Stockolio, Apr 8, 2019.

  1. I detailed why China's economy is in disaster, gave overview of there problems

    Went Super Saiyan since Saturday and completed it... This was a response to Michael Pettis, who believes China will manoeuvre a lost decade like Japan did, but I counter argued with this Thesis. I shall send him the thesis by email and wait for his counter

    If anyone has good counter points, please participate!
    aqtrader likes this.
  2. JSOP


    If we contribute to your thesis, we want our handles, our avatars on your thesis. LOL
    Stockolio likes this.
  3. Woodrow97


    I currently have someone working in due diligence with Chinese companies in HK, I have sent him this to verify the info. :D
  4. destriero


  5. zdreg


    I just pulled out my copy for a reread of Michael Pettis "The Volatility Machine" Emerging Economies and the Threat of Economic Collapse, Oxford University Press 2001
    Stockolio likes this.
  6. Hopefully you said "their problems" in your thesis instead of "there problems" :D
  7. He has been saying on multiple occasions, china will have a soft landing... They will go stagnate for a decade, and bounce back. He is a great mind for sure, deep thinker but is view doesn't match the numbers

    Corporate debt in china is equivalent to 27 Trillion US, on paper... With Shadow Banking being so prevalent there, true numbers could easily be 35 Trillion US. On paper, 70 % of debt created in the world since 08 has come from China's corporate sector, there overall debt increased 650 % ( on paper ) since 08... Madness happened for the past 10 years. There is no way any form of soft landing is ever taking place, they are already in a deep recession and not even close to the bottom... Cross guarantees on each other's debt is crushing them at the moment
  8. Specterx


    My instinct is to say you underestimate the CCP's capacity to manage these problems. The narrowing of China's current account is driven by outbound tourism which the government can easily shut down, with none of the controversy of import restrictions or currency gaming, should they need to bolster foreign reserves.

    Likewise, domestic-currency debt owed to and by domestic entities is a domestic political problem, not an economic one, and dealing with political problems is the party's speciality. This isn't the West, if the government decides you're not going to sell that bond, or collect on that debt, or sell those shares lower than you bought them, then you just take the hit and keep quiet. To the extent losses and bad debts exist they must be apportioned somehow, but the government has extremely wide latitude to do so across a huge number of entities and also across time, and in a totally non-transparent way.

    If Pettis does respond to you it'd be interesting to see what he has to say...
    GRULSTMRNN and Seaweed like this.
  9. Opinions opinions opinions... Domestic currency debt owed to and by domestic entities is a domestic political problem, not an economic one ? What do you call Price To Income Ratio of 30 ? Mortgage as percentage of Income 240 % ? That's a political problem the consumers have or a financial problem they have ?

    One would have to be seriously a homer for China, or seriously clueless on Economical Gravity... Do you understand the direct effects of QE and Inflation ? Can you imagine once Foreign Reserves dip below 1 Trillion US, and they have to float there dollar, but have 2 quadrillion in circulation ? You understand the more they print, the less the consumer can consume ? Deglobilisation has been in effect since 2016, look at rate of multi nationals pulling out... Capitalism has no loyalty, cpp seemed to have forgot that part. What happens when they can't pay External Debt anymore cause Reserves are gone ? They cannot do business with anything less then 1 Trillion in US Reserves, and are fast approaching that amount... 3.5 Trillion US External debt, growing 70 Billion a Quarter. Read the thesis, then counter argue, I would love to debate with you by facts tho, not opinions... Would be interesting

    China Deficit Account.png
  10. The debt grew so out of control, there debt servicing capabilities are almost non existent. High majority of there debt is bad and non productive... On paper, only 40 % of LGFV total revenue can cover 2019 entire maturity's. You had 124 Billion Yuan Defaults in January 2019 alone, according to there own research which is heavily biased towards greener days, indicates 60 % of LGFV debt maturity in 2019 will default... That's a political problem or a financial problem ?
    #10     Apr 8, 2019