Over bearish about China economy is Not warranted.
The HongKong HSI index was down more than 4% again on Monday and China US $ CDS is around 200 bps. It has been down 30% YTD.
Too much bearish on Chinese economy is not warranted. Chinese has foreign reserve more than $3T and the government foreign debt is minimized around $40B.
So selling china CDS at 200bps Now is a very good safe businessJ. Bearish shorter needs to be reminded: Fed only has $2.8T balance sheet after two QE and still way short of China’s reserve.
Looking at China’s monthly import and export report, the majority import is oil, copper, iron ole. The collapsing price of raw materials is very much benefit to Chinese economy.
Let me be clear, it is the government intention to cool and correct property market and fight inflation. But I would not be too bearish and putting against already cheap HSI index.
Hongkong government itself has around $230 Billion foreign reserve and with China’s 3T, it is death gambling.
Short-sells might be crushed if Hongkong or China government starts to buying cheap assets. This is a very likely if the market near 2008 low.
If you were so right, would not all investors who have collectively made a lot from betting against China financials be so very wrong? What is holding up China and not preventing some sort of slow down from 9% growth to 5% growth happening over next few years? What goes up must come down!
& Chinese Gov’t is VERY OPEN when it comes to assets, but almost completely closed when it comes to publishing data on loans gone bad that are worthless.
Amid poverty, Chinese officials splurge on lavish vanity projects
China is rife with extravagant building projects in backwater towns often grappling with poverty.
always right about those margines. One thing to think about is those bonds had this 5% yields in Europe. Not in the tralala sort of support with China but then those high rise are soooo expensive. Real Estate may be harassed but doing it through manufacturing and your airline industry may not be even as berzerk, Over all China is always looking forward and not into cha cha anymore with its reserves.
But I’m still worried about that Pearl Delta issue and will it cooperate?
the current valuation provide trading opportunity. A 9% growth to a 5-7% growth is good so they will enjoy cheaper natural resources.
That is making a lot of rosy assumption. Yes there may be trillions in FX reserves but how many trillions in bad debts are there that must be written off by state owned banks? 2 trillion? 3 trillion? 4 trillion? Nobody really knows yet.
There are more industries to think about in China. One is the aircraft manufacturing section. Second they are opening the pearl river Delta for better routes more strategic than before. The buildings are not as extravagant as you people see it but practically made to suit the population.
It has already come down in 2009, and it’s slow recovery should give you a hint of a safer transition. GM chose china.
They have less than $6T total loans by July 2011. you could easily find the figure by googling it. So I don’t know where we get the 2T, 3T ,4T loss figure? Chinese big banks are audited by the big four. If there are any evidence big 4 are not doing there job, every shareholder could sue them for the loss.
Do you know who else was ‘audited’ by the ‘Big Four’ ???
Lehman Brothers, and Enron and Worldcom. All went bankrupt with ‘clean bills of health’.
The true health can of its balance sheet can be gauged by level of bad loans in the trillions minus the assets. Assets are revealed but not full levels of bad loans from past few years.
This article below goes into full detail backed up by David Cui from Bank of America:
“As David Cui of Bank of America-Merrill Lynch Global Research writes:
LGFV loans are at Rmb10tr by the government’s estimate; the ones with no cashflow support, i.e. those public service projects mostly, amount to Rmb2-3tr; given the initial estimate tends to under-estimate the scale of most problems, e.g. subprime & PIGS debt to just name a few, we suspect the above numbers are a best-case scenario rather than a worst-case scenario.”
The issue I have with China is simply the level of control the Communist government has over every aspect of life, including businesses.
Our main problem in this down-turned US economy, and the world economy is government interfering and over spending. The interference forced banks to make bad loans to people who did not have the ability to repay, and then allowed the securitisation of the loans, big mistakes. Then the government decided that the way out of debt was to spend more money, and so forth.
The level of control here in the US is far too high, as is the level of spending, not double or triple the amount of control and remove the right of protesting and remove the freedom of speech and press, which helps check this by making people aware of the problems.
Problems? Such as ignoring the HIV warnings, pretending they do not exist then continuing to not check blood transfusions and spreading AIDS across China en masse. I personally know a man being harassed and arrested repeatedly for simply pointing this out, trying to make the government take care of the problem it created.
Or the huge mistake of damming the Yellow River (aka Huang He, or Hatan Gol, or Hwang Ho) built under good intent to make hydroelectric power and stop the frequent flooding which killd hundreds of thousands of people, but when scientists pointed out that, since the river carries between 1,600,000,000 and 3,910,000,000 tons of silt annually, the dam would soon fill with sediment, that is why it was yellow, they were thrown in jail. Of course, each dam filled with sediments quickly after being built and now have severely reduced capacity.
Then there is the problem with pollution in the rivers, as China now only is not concerned with humans rights, but neither are they concerned with the volumes of sewage and chemical pollution that is dumped in the river in their quest for economic growth, and so, in several rivers the contamination is so bad the water cannot even be used in agriculture.
Lastly the dependence for growth on another country, the US, is not good. Our downturn is going to reflect in their economy for many years as we are not at the bottom yet and we are turning, rightly, toward a “made in the USA” attitude to save our own jobs. This does not bode well for China which should be a good investment when the Yellow River runs clear.
Markets can be ‘supported’ in the short term, yes that is absolutely correct, and now may not be the time to go short as you say. However history has shown that more money has been lost on the basis of ‘this time it is different’ than to any other sentiment.
The 3 trillion of fx reserves is still puny compared with the damage that could ensue from a worldwide bear market and to assume that the situation in China can be ringfenced is ludicrous. I do hope you are right though because if we do have a bear market for the next two years, (never mind what the charts say about how we are so far tracking the Nikkei since 1990, implying a further 12 years of downward steps still to come), then we will all cause to moan. More optimism is required – YES!
Give me something like BOMBERS when you talk about those big 4 auditors! They swing up with those gizmos like they have never known cha cha in their entire life. And while youre at it, check on Lehman in Japan! When South Korea went bonkers a month, China did the songbird edition of green backs in North America. A wiser addition to their smart portfolios to open those European Market humor. Why reveal bad loans when you can deal with the good stuff like railways and tabacco? Here in the Philippines, we get Tabacco from China. And China loves those precious metals. Why? Europe!
Ant those trillions are just for that cycle trios unless you’re a psycho who puts an end to it by saying “Debt Crisis” wins. No. China is round. unless you’re square!
I see few major fundemental problems with the Chinese economy. I’ll share with you two of them. First, China is artificially fueling its economy by pumping money into selected sectors. Pumping money to the construction sector, for example, in order to keep growth has resulted in Mega ghost cities in which no one lives becuase the average chinese can’t afford to pay the price of an apartment. Second, the one-child policy has not just resulted in a generation of men who can’t start a family (lack of females) but also has generated an insolvable pension problem (similar to the aging European population but for a different reason).
These two problems alone will ultimately “burst” in the near decade.
Interesting comments above. To add to the mix is the prospect of China becoming a consumer based economy with a material reduction in its export capabilities as demand continues to be depressed worldwide
, there is no such thing as ghost cities in China. Perhaps they have not been rented yet or have not finished construction yet. I just spoke to my friend about construction this afternoon in China everything is doing well and that one child promo is not even a factor where pension is concerned.
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