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China may crash? [Copy link] 中文

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Post time 2011-5-5 22:27:27 |Display all floors
I just read sth about Marc Faber.  
On May 2010, he said China may 'crash' in Next 9 to 12 months.
And many other economists made simiiar judgements.

Of couse we Chinese want a rising Chinese economy. And then we need to read the support evidence in their opinions.

I'll copy some of them here.
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Post time 2011-5-5 22:43:49 |Display all floors
1.China May `Crash' in Next 9 to 12 Months, Faber Says
On May 3 2010
(So far one year has past)

Investor Marc Faber said China's economy will slow and possibly "crash" within a year as declines in stock and commodity prices signal the nation's property bubble is set to burst.

The Shanghai Composite Index has failed to regain its 2009 high while industrial commodities and shares of Australian resource exporters are acting "heavy," Faber said. The opening of the World Expo in Shanghai last week is "not a particularly good omen," he said, citing a property bust and depression that followed the 1873 World Exhibition in Vienna.

"The market is telling you that something is not quite right," Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today. "The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months."

An index tracking Chinese stocks traded in Hong Kong dropped 1.8 percent today, the most in two weeks, after the central bank raised reserve requirements for the third time this year. The Shanghai Composite has slumped 12 percent this year, Asia's worst performer, as policy makers seek to rein in a lending boom that's spurred record gains in property prices. China's markets are shut for a holiday today.

Copper touched a seven-week low and BHP Billiton Ltd., the world's biggest mining company, fell the most since February on concern spending in the world's third-largest economy will slow and after Australia boosted taxes on commodities producers. Rio Tinto Ltd., the third-largest, slid as much as 6 percent.
Chanos, Rogoff

Faber joins hedge fund manager Jim Chanos and Harvard University's Kenneth Rogoff in warning of a crash in China.

China is "on a treadmill to hell" because it's hooked on property development for driving growth, Chanos said in an interview last month. As much as 60 percent of the country's gross domestic product relies on construction, he said. Rogoff said in February a debt-fueled bubble in China may trigger a regional recession within a decade.

The government has banned loans for third homes and raised mortgage rates and down-payment requirements for second-home purchases. Prices rose 11.7 percent across 70 cities in March from a year earlier, the most since data began in 2005.

The government has stopped short of raising interest rates to contain property prices. Within an hour of the central bank announcement on reserve ratios, Finance Minister Xie Xuren said that officials remained committed to expansionary policies to cement the nation's recovery.
Stocks ‘Fully Priced'

The nation's economy grew 11.9 percent in the first quarter, the fastest pace in almost three years. The government projects gross domestic product growth for the year of about 8 percent.

The clampdown on property speculation may prompt investors to turn to the nation's stock market, Faber said. Still, shares are "fully priced" and Chinese investors may instead become "big buyers" of gold, he said.

BlackRock Inc. is among money managers reducing their holdings on Chinese stocks on expectations that economic growth has peaked. The BlackRock Emerging Markets Fund has widened its "underweight" position for China versus the MSCI Emerging Markets Index to about 7.5 percent from 4.6 percent at the end of March, the fund's London-based co-manager Dan Tubbs said.

Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd, the nation's three largest banks, are trading near their lowest valuations on record as rising profits are eclipsed by concern bad loans will increase.
Local Governments

Citigroup Inc. warned in March that in a "worst case scenario," the non-performing loans of local-government investment vehicles, used to channel money to stimulus projects, could swell to 2.4 trillion yuan by 2011.

Housing prices nationwide may fall as much as 20 percent in the second half of the year on government measures to curb speculation, BNP Paribas said April 23. Under a stress test conducted by the Shanghai branch of the China Banking Regulatory Commission in February, local banks' ratio of delinquent mortgages would triple should home prices in the country's commercial center decline 10 percent.

Shanghai is projecting as many as 70 million visitors to the $44 billion World Expo, more than 10 times the number who traveled to the 2008 Beijing Olympics. More than 433,000 people visited the 5.3 square-kilometer (3.3 square-mile) park on its first weekend.
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Post time 2011-5-5 22:58:29 |Display all floors
2 Andy Xie: Either America Or China Will Crash In 2011
Dec 27 2010

America will continue to pump the financial system with liquidity via tax cuts and quantitative easing. China will keep the yuan cheap and avoid clamping down on inflation.

The tense equilibrium can't last for long, as either sovereign debt or inflation gets too heavy to bear. Whoever lasts longer, wins.

Caixin:

The most likely candidates to trigger the next global crisis are the U.S.'s sovereign debt or China's inflation. When one goes down first, the other can prolong its economic cycle. China may have won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices.

On the other hand, if China has a hard landing, the U.S.'s trade deficit can drop dramatically, maybe by 50 percent, due to lower import prices. It would boost the dollar's value and bring down the U.S.'s treasury yield. The U.S. can have lower financing costs and lower expenditures. The combination allows the U.S. to enjoy a period of good growth.

Xie notes that China may have the advantage here. While America has committed to a liquidity hose, Beijing still has the opportunity to crack down on inflation:

China's inflation problem stems from the country's rapid monetary growth in the past decade. That is due to the need to finance a vast property sector, which is, in turn, to generate fiscal revenues for local governments to finance their vast expenditure programs. Unless something is done to limit local government expenditure, China's inflation problem is likely to get out of control...  

There are two ways to limit local government expenditure. One is to cut their funding source. Their main revenue sources are land sales, property taxes, and bank loans. The last source is drying up a bit, as banks are saddled with high exposure to the sector already and are trying to decrease it. This change isn't biting yet because local governments haven't spent all the money they borrowed before.
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Post time 2011-5-5 23:00:50 |Display all floors
Originally posted by 468259058 at 2011-5-5 22:45
Chanos said in an interview last month. As much as 60 percent of the country's gross domestic product relies on construction..
.

60% of China's  GDP relies on construction?

Where is this datum from? Is it right?

[ Last edited by 468259058 at 2011-5-5 11:04 PM ]
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Post time 2011-5-5 23:02:57 |Display all floors
Originally posted by 468259058 at 2011-5-5 22:58
if China has a hard landing...
.

China did have a soft landing after the high inflation in 1990s when Chinese premier was Zhu Rongji.
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Post time 2011-5-5 23:07:47 |Display all floors
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Post time 2011-5-5 23:10:31 |Display all floors
Originally posted by Wahahaha at 2011-5-5 23:07
IF indeed China should experience such a drastic adjustment (that wankstains like you would eagerly label as a "crash"), I'll bet that MOST of the rest of the world will be in far deeper  ...


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