Credit Writedowns - Latest Comments in China is set up for a big fall

Re: China is set up for a big fall

Greg Norris — Tue, 03 Feb 2009 06:22:49 -0000

Hello Mr. Harrison,

RE: Edward Harrison Says:
December 27th, 2008 at 3:01 pm

Thanks Greg. For some reason, those links don’t process. Would you send them again?

Here are the two links again (apologies for the delay in re-sending them):

http://www.globalsecurities...

and

http://www.garpdigitallibra...

Best Regards,

Greg Norris

Re: China is set up for a big fall

Edward Harrison — Sat, 27 Dec 2008 15:11:30 -0000

@steven: and he is looking to put more billions at work. From where I sit the emerging markets look like a place to avoid at the moment because the full force of the downturn will hit the G7 first and fan out from there. You look at countries like Brazil, Russia, Argentina, South Korea, India, and China and you see places that are getting hammered by low commodity prices and are having severe foreign exchange turbulence. I anticipate this to continue for quite a while. Only time will tell about Mobius, but one wonders whether he has become a perma-bull on emerging markets.

Re: China is set up for a big fall

Edward Harrison — Sat, 27 Dec 2008 15:08:32 -0000

@Mothman, you make a good point. I agree with the story's analysis however and that is much of the reason I presented it. However, it would not be unreasonable to believe the reporter had an axe to grind about China.

Re: China is set up for a big fall

Edward Harrison — Sat, 27 Dec 2008 15:01:21 -0000

Thanks Greg. For some reason, those links don't process. Would you send them again?

Re: China is set up for a big fall

Edward Harrison — Sat, 27 Dec 2008 15:00:04 -0000

Glen, I agree with your skepticism 100%. On the other hand, the fact that Marshall Auerback and other pretty smart analysts have a more upbeat view on China keeps me from dismissing a quick rebound scenario. I do agree with Marshall that China will still be a much better bet for growth after the recession has eased. But, for now, I see most of the risk on the downside there. Mainly, I look at China like one might see a 1970s Korea or a 1960s Japan -- and that means ty will overcome this recession eventually, but not without significant pain.

Re: China is set up for a big fall

Glen — Fri, 26 Dec 2008 23:39:17 -0000

It strikes me as odd how China will be able to shift their population into consumption mode when every asset class they have invested in has fizzled there by reducing their wealth. The other problem I see is that a large bulk of Chinese wages earners do not have the capacity to buy most of the goods they produce any way given their low wage rates. It's a flight of fantasy to think this can be done in 12 months when other nations have taken 20+ years to progress (regress?) to a consumption driven society.

Re: China is set up for a big fall

Greg Norris — Thu, 25 Dec 2008 21:49:41 -0000

For readers' possible interest, here are links to two excellent reports assessing China's economic outlook:

http://www.globalsecuritieswatch.org/PRC_Sovereig...

and

http://www.garpdigitallibrary.org/download/GRR/20...

Enjoy!

Best regards and thanks for a great blog,

Greg

Re: China is set up for a big fall

Mothman — Wed, 24 Dec 2008 05:25:22 -0000

Be careful quoting Indian articles in relation to China. They are invariably negative - INdia has a big brother relationship with China - and believes their economy (unweildy democracy, lack of infrastructure, less foriegn investment) is superior to China's model. Even when the chinese economy was powering I never saw a positive article written by an Indian reporter.

Re: China is set up for a big fall

steven — Wed, 24 Dec 2008 04:00:56 -0000

Just wondering how many billions of $ Mobius has lost in the Indian and Chinese stock market over the past year and a half.

Re: China is set up for a big fall

John Creighton — Wed, 24 Dec 2008 02:03:08 -0000

Blaming other people is what politicians do to hide from accountability. We must not forget that the Chinese government fulled this imbalance by paging the Chinese currency against the US dollar at an artificially low rate.

Re: China is set up for a big fall

aheadofthecurve — Tue, 23 Dec 2008 18:43:18 -0000

Auerback is far behind the analytical vanguard where China is concerned (I recommend you read http://mpettis.com/ ), largely because he's ignoring the export-led employment bubble that has burst. He can dismiss asset deflation as a bonus for employed Chinese, but he's got nothing to say about the millions of unemployed and soon-to-be unemployed workers and students, most of whom are male and young.

I hope the CCP has an answer for this that doesn't involve blaming the situation on the West. Otherwise I think the German comparison is on-target and a dangerous proposition.

Re: China is set up for a big fall

wen O wen — Tue, 23 Dec 2008 17:08:21 -0000

Fake numbers every where.
see Shadow stats . c o m etc.

Re: China is set up for a big fall

Edward Harrison — Tue, 23 Dec 2008 13:20:20 -0000

@sobers, I would tend to agree with our views. It's funny you should mention Germany. I see China as another East Germany, posting economic numbers for external consumption. The question is how real are they. In East Germany's case we found out after reunification that the numbers were fake. Will the same be true in China? Only time will tell.

I should point out that Marshall Auerback has a considered view greatly a odds with my own. See his recent post here:

China can handle collapse of speculative inflows

Let me know what you make of his argument and feel free to give him a piece of your mind! He and I disagree but he knows China quite well.

Re: China is set up for a big fall

Sobers — Tue, 23 Dec 2008 13:10:24 -0000

China will be an economic (and social) disaster zone by late 2009. We may never know how bad it may get there. The Communist govt will suppress all evidence ruthlessly, and restrict Western media access. Any nation that is as export oriented at China is today will have horrendous problems when the demand for their manufactures just stops. Given the lack of social safety net in China it could be very ugly. But as I said, we will probably never know how ugly.
Germany is in a similar but lesser situation. They will suffer most in Europe I think, but given they are a nation with a welfare system, not too excessively.