UH OH: China told property risk is worse than in US. “The problems in China’s housing market are more severe than those in the US before the financial crisis because they combine a potential bubble with the risk of social discontent, according to an adviser to the Chinese central bank. . . . ‘The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,’ he said in an interview. ‘It is more than [just] a bubble problem.’”
“The train can go 394.2 kilometres per hour, it’s the fastest train in operation in the world,” Zhang Shuguang, head of the transport bureau at the railways ministry, told Xinhua. By comparison, the average for high-speed trains in Japan was 243 kilometres per hour while in France it was 277 kilometres per hour, said Xu Fangliang, general engineer in charge of designing the link, according to Xinhua. Beijing has an ambitious rail development programme aimed at increasing the national network from the current 86,000 kilometres to 120,000 kilometres, making it the most extensive rail system outside the United States.”
The China bears tell us that stimulus spending there is largely being wasted. This report from Al Jazeera offers startlingly strong support for that proposition:
China’s economy is continuing to grow despite the global recession, helped by a massive government stimulus package of $585bn.
But doubts remain whether such strong growth can be sustained by public spending alone.Al Jazeera’s Melissa Chan reports from Inner Mongolia, where a whole town built with government money is standing empty.
Jim Chanos is bearish on China and I think he has a very good point. China suffers from huge overcapacity in every sector and their statistics are made up.
“Jim Chanos, head of investment firm Kynikos Associates and famous for his call to short Enron in 2001, has found his next big target.
Chanos and other China bears say the country has overcapacity in just about every sector of its economy, and the government’s massive stimulus isn’t working. They think China is simply covering things up with faulty statistics.
For example, they point to the huge reported increases in car sales in contrast to numbers showing little growth in gasoline consumption, which suggests state-run companies are buying huge numbers of cars and putting them in storage.” in The Daily Crux
“If you slap somebody in the face, they are going to take a defensive attitude to save the face…I do not know why the United States is doing this in public, that never worked, especially with Asians.”
The Ascent of Money: A Financial History of the World by Niall Ferguson
“The shadow world of derivatives, credit-default swaps, the sales of U.S. bonds to China ; all seem to bring brilliant results, until they get too big.”
Great book ; go out there and buy it, thank me later 🙂
With Chinese data now an official farce even among Wall Street economists, tenured academics, and all others whose job obligation it is to accept and never question the lies they are fed, the biggest question over the past year has been just what is China’s real, and rapidly slowing, GDP – which alongside the Fed, is the primary catalyst of the global risk shakeout experienced in recent weeks.
One thing that everyone knows and can agree on, is that it is not the official 7% number, or whatever goalseeked fabrication the communist party tries to push to a world that has realized China can’t even manipulate its stock market higher, let alone its economy.
But what is it? Over the past few months we have shown various unpleasant estimates, the lowest of which was 1.6% back in April.
Today we got the worst one yet, courtesy of Evercore ISI, which using its own GDP equivalent index – the Synthetic Growth Index (SGI) – gets a vastly different result from the official one, namely Chinese growth of -1.1% annually. Or rather, contraction.
To wit, from Evercore:
Our proprietary Synthetic Growth Index (SG!) fell 1.1% mim in July, and was also down 1.1% y/y. No wonderglobal commodities are so weak. The most recent 18 months have been much weakerthan the 2011-13 period. Even if we adjust our SG I upward (for too-little representation of Services — lack of data), we believe actual economic growth in China is far below the official 7.0% yly. And, it is not improving, Most worrisome to us; the ‘equipment’ portion of Plant & Equipment spending is very weak, a bad sign for any company or country. Expect more monetary and fiscal steps to lift growth.
And here is why the world is in big trouble.
