The Chinese Death Star

Kilt2 wrote: <span style="color: rgb85, 85, 85; font-family: 'Helvetica Neue', Helvetica, Arial, 'Lucida Grande', sans-serif; font-size: 13px; line-height: 21.84000015258789px; : rgb255, 255, 255;">In the public sector Chinese local government debt has risen 67% to $3 trillion. According to Robert Samuelson, “local debt now equals about 33 percent of China’s economy up from 10 percent in 2008 and almost nothing in 1997.” Most of the local debt is from financing new infrastructure such as roads and bridges and from building new cities notoriously known as “ghost cities” constructed of commercial buildings that sit empty and uninhabited apartments. Tao Wang of UBS (a Swiss global financial services company) believes “dependence on this investment spending poses a dilemma for China.” If localities cut spending, the economy would be severely weakened. If localities keep spending at the same rate, localities could face default.</span> <span style="color: rgb85, 85, 85; font-family: 'Helvetica Neue', Helvetica, Arial, 'Lucida Grande', sans-serif; font-size: 13px; line-height: 21.84000015258789px; : rgb255, 255, 255;"> </span> <h3 ="r" style="font-size: medium; font-weight: normal; margin: 0px; padding: 0px; overflow: ; text-overflow: ellipsis; color: rgb34, 34, 34; font-family: arial, sans-serif; : rgb255, 255, 255;">[URL=http://www.houghtonstar.com/2014/03/01/china-a-falling-star/]<span style="font-weight: bold;]China</span>: A Falling Star[/URL]</h3><div ="slp" style="margin-bottom: 1px; color: rgb34, 34, 34; font-family: arial, sans-serif; font-size: small; line-height: 15.600000381469727px; : rgb255, 255, 255;"><span ="news-source" style="color: rgb0, 153, 51;">The Houghton Star</span><span ="hpn" style="color: rgb119, 119, 119; padding: 0px 4px;">-</span><span ="f nsa" style="color: rgb102, 102, 102;">10 hours ago</span><span ="news-share"><a ="pplsrsla" -ci="srslc_3" -desc="Despite its reputation as an economic powerhouse, <em>Chinese</em> economic and <em>...</em> “Fears about the slowing <em>Chinese</em> economy, a potential property <em>bubble</em> and <em>...</em>" -sli="srsl_3" -title="<em>China</em>: A Falling Star" -="http://www.houghtonstar.com/2014/03/01/china-a-falling-star/" -vli="srslcl_3" id="srsl_3" js="srl.s" -slg="webres" role="" ="0" -ved="0CDkQ5hkwAw" style="cursor: pointer; margin-left: 5px; text-decoration: inherit; color: rgb102, 0, 153;"><span ="pplsrsl" style="color: rgb170, 170, 170; visibility: inherit;">Share</span></a></span> <div ="st" style="line-height: 1.24; color: rgb34, 34, 34; font-family: arial, sans-serif; font-size: small; : rgb255, 255, 255;">Despite its reputation as an economic powerhouse, <span style="font-weight: bold;">Chinese</span> economic and <span style="font-weight: bold;">...</span> “Fears about the slowing <span style="font-weight: bold;">Chinese</span> economy, a potential property<span style="font-weight: bold;">bubble</span> and <span style="font-weight: bold;">...</span>

Here is the other part of the same article... Context is everything

"Here’s something to watch in 2014: China’s debt. Although the odds of a full-blown financial crisis are slim, they’re not non-existent. The flash point is the burgeoning debt of Chinese localities to finance major infrastructure — roads, bridges, water and sewer systems, subways, telecommunications networks — as well as housing and commercial real estate developments. The fear is that revenues from these projects won’t be adequate to repay the loans, resulting in defaults that undermine confidence and trigger bank runs. This would surely rattle the broader global economy....

Meanwhile, he doubts the existing debts will cause a financial crisis. He points out that China’s overall government debt — combining the amounts for the local and central governments — compares favorably with most major countries. In mid-2013, China’s debt was 56 percent of GDP, estimates Wang. By contrast, U.S. federal, state and local debt was about 100 percent of GDP in 2010, according to calculations by Lardy’s colleague, Ryan Rutkowski."

China's property trusts face rising default risks South China Morning Post-3 hours agoShare The mainland's property trusts face rising default risks as a former central bank adviser dubs real estate the biggest threat to the economy.

A more 'neutral' search criteria that includes 'China' and 'economic outlook' yields something quite different-


China Record Credit Growth Boosts Outlook for Economy
Bloomberg - ‎Feb 16, 2014

China's Record New Credit Boosts Outlook for Growth in 2014
San Francisco Chronicle - ‎Feb 17, 2014‎

Asia stocks rally, dollar slips as emerging market fears ebb
MSN Money - ‎Feb 16, 2014‎

China's Trust Assets Rise, Group Says
NASDAQ - ‎Feb 13, 2014‎

all 187 news sources

China is a Bubble in the process of bursting.

I appreciate knowing that others do... Can get a little lonely on this thread!!!
Again, I'm not seeking to hijack thread although I do admit my emotions sometimes get the most of me and I have posted unflattering comments that have resulted from my outrage...
I have turned over a new leaf and only hope to present a bit of a differing opinion.

Indeed, bad news can be found all over the world if you go looking for it..

As Investment Dwindles, Australia's Economy Is Lost in Transition
Wall Street Journal (blog)-Feb 28, 2014
Economists expect Wednesday's data to show the economy grew a ... pause after its more upbeat-than-expected economic outlook” last month, ...
Flash: Australia's capex a setback for RBA - Nomura FXstreet.com
RPT:PREVIEW:Focus On Non-Mining Capex As Australia Eyes Survey ForexTV.com
all 7 news sources »

Misreading China's economic tea leaves
Steve Barnett6 Feb, 3:03 PM 4
EconomyChinaGlobal News
iMFdirect

“Economic Shifts in U.S. and China Batter Markets” continuing “Stocks Slide Globally…Investors Head for Exits” read the front-page headline in last week’s New York Times. Not sure about the U.S. part, I’ll leave that to others. But, as for China, this seems quite a stretch. Could be the pundits are erring in blaming the market slide on China, or perhaps the markets are misreading news coming out of China.

The purported China trigger was a survey of manufacturers. The Purchasing Managers’ Index (PMI) fell somewhat, crossing the magic threshold from expansion to contraction. PMIs are useful, but let’s not get carried away. China’s PMI is not the best indicator for growth, the decline was rather small, and January and February data (because of the Lunar “Chinese” New Year) are hard to interpret.

In early January, we actually raised our forecast for China’s growth in 2014. Specifically, from 7.25 per cent projection made in October to 7.5 per cent. The subsequently published 2013 data — 7.7 per cent annual growth — matched our expectation and we reaffirm our forecast for 7.5 per cent growth in 2014.

So, yes, we see a moderate slowing in China’s economy. This is expected, indeed welcome, as China moves to a more inclusive, green, and sustainable growth path (see China: Why Less is More). Our projection is for growth to slow 0.2 percentage points. This is peanuts for an economy growing at 7.5 per cent. And, given the momentum in domestic demand and improved outlook in advanced economies, growth this year could very well be higher.

Specifically, we expect domestic demand to moderate as the government implements its recently announced economic blueprint. While containing the risks from rapidly expanding credit and rising local government debt will put the economy on sounder footing, it will also be a modest drag on domestic activity. This is a good trade-off for securing long-term growth. Thus, buried in our forecasts is a slowing of domestic demand — over half a percentage point — partly offset by rising net exports fuelled by the global recovery.

Global markets are understandably interested in developments in China. It is the world’s second largest economy and a critical source of global demand, especially for commodity producers. Continued healthy growth is thus important for both China and the world. Healthy growth, moreover, likely means a gradually slowing economy.

Slowing to the fastest sustainable growth rate possible, which we estimate would be around 6 percent on average between now and 2030. In this case, China would continue to boost living standards at home while providing welcome support to the world economy for many years to come.

Steven Barnett is a Division Chief in the Asia and Pacific Department of the International Monetary Fund (IMF).

This article first appeared on iMFdirect.



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alex lastName, Thu, 2014-02-06 16:22
I don't think the panic is from the thought of a slowing sustainable economy. It may come from the thought that a slowing economy could trigger a property bubble pop, or shadow debt crisis which many people believe are inevitable.
Why are so many wealthy Chinese investing in overseas property? Why do so many wealthy Chinese desire to leave China?
Is the growth really that high when you take out the redundant developments that will return negative yields over time?

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Elise Zhou, Thu, 2014-02-06 17:00
Wealthy Chinese invest in both China & overseas. The recent figure showed there are over 3,000 Beijing residents own 600+ properties in China. In a bid to curb over heated property market/property bubble,the Chinese government recently imposed hefty tax on the 2nd and plus property & properties not owner occupied drive many Chinese investors overseas. For your 2nd question, wealthy Chinese do not desire leave China. But they do desire PR (as many as they can) without losing their Chinese citizenship.

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Phil Clarke, Thu, 2014-02-06 22:49
The Chinese investment craze is weird - one can only tackle it piecemeal to try to get a grip on it.

Here is one paradox. Western industrial production has been largely turned over to the Peoples Republic of China - a communist state. The Chinese mainland investors certainly do not come from these exploited banks of cheap labour - indeed the conditions are pretty bad and wage levels rather poor. Few could afford decent homes in China. Some even commit suicide

So none of the money is coming from the wages paid to workers carrying out tasks for western Corporations.

So really who actually is this elite that is exporting the capital that purchases property in Australia - apartments they often leave empty?

Maybe we should be asking one heck of a lot of questions... Nothing happens in China that is not scrutinised and controlled by the Government somewhere along the line, so what is really going on? The campaign against corruption and the sheer amount of Chinese investment overseas are not compatable

Just asking

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Phil Clarke, Thu, 2014-02-06 22:52
Just a rider to my previous post. i had hoped when China Spectator came into existence that these fundamental questions would be tackled - Instead I feel they have been avoided.

So how about addressing these core questions? Thanks

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Kilt2 wrote: once a troll always a troll what is it with Canadians?

Maybe we like to hear both sides of the argument??
Is that a bad thing???
What exactly is a troll anyway?

Kilt2 wrote: The point is China is a Bubble and when it bursts will be felt all around the globe. The Influenza viruses H2N2, H3N2, H5N1 and H7N9 with many more to come, all originate from China and all have or potentially will bring death to this planet on an industrial scale. The influenza pandemics are most likely to originate in China. China is a Death Star.

Balance that

Well Friday is the day the house of cards that is China gets shaken.

Its a Bubble and it is bursting like the US Housing Bubble.

more death from China

This is another article from CNBC news and not my personal opinion. I think it is a point of view worth considering when weighing both sides of the issue.

"Rare bond default warning in China a good thing"
We think it's a good thing as a normal economy needs defaults to better price bonds and other debt products," they said in a note. "There's no need to worry. Let's not underestimate Chinese onshore investors' resilience. Defaults of some debt products are not on a similar scale to a collapse of a major financial institution.
"We believe the chance of some bond and trust loan defaults will rise significantly in 2014, especially as the more confident government sees the need for some defaults to develop a more disciplined financial market," they added.
— By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC

Bond default a "moment of reckoning for the Chinese government"

I am an Aussie.

If the rest of the world was in a good condition any China-crisis would not be a big problem, the rest of the world economy would be able to deal with it. The combination of a slowing down of Chinese economic growth (6,5 % growth is still enormous !) with stagnation of other leading markets is a problem. 

Dutch Josh wrote: kilt2-Australia is exporting raw materials to China, Japan etc. A collapse of the Asian market will backfire on Australia. How is the discussion in Australia to deal with that problem ?

Economy using as a weapon is an old strategy. (For instance; in W.W.2 the Germans tried to put lots of false Pounds on the British Market. W.W.2 was in a certain sense the biggest economic war for oil, metals etc. the world has seen so far.) I understand that it could be possible that Russia and China, later on followed by others, might stop using the US-dollar. http://www.infowars.com/economist-warns-of-collapse-risk-will-not-allow-life-to-continue-as-we-know-it/ (for what infowars is worth)

nearly 3,000 views of this thread

http://www.wnd.com/2014/03/china-intercepted-missing-malaysian-flight/ 

China’s premier warns investors to prepare for wave of bankruptcies

http://utopiathecollapse.com/2014/03/14/chinas-premier-warns-investors-to-prepare-for-wave-of-bankruptcies/

Johnray1, I was mentioning a suggestion on internet of what might have happened to that plane. (Being shot down sounds more realistic than "disapearing in an other dimension" or "taken over by UFO's).  It remains a strange story.