China Economy

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Vitaliy Katsenelson: Why China will crash

In November 2010, I published a fascinating interview with Vitaliy Katsenelson – author of the Little Book of Sideways Markets (highly recommended), and teacher and Director of Research / Portfolio Manager at Investment Management Associates Inc, a money management firm based in Denver, Colorado. In this interview, Vitaliy provided possibly the best discussion of the

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Moody’s identifies another $540b of Chinese problem loans

Following on from today’s post on Gary Shilling’s warning that China is headed for a hard landing, credit ratings agency, Moody’s Investor Services, today released a report claiming that it has identified an additional 3.5 trillion yuan ($US540 billion) of potential problem loans that the Chinese National Audit Office (NAO) did not disclose in their

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Another China ghost city filled

Back in April I published an article, China’s largest ghost cities filled, providing an ‘eyes on the ground’ report from Wendell Cox, co-author of the Annual Demographia Housing Affordability Survey, who was touring China at the time. Wendell had provided photographic evidence showing that one of China’s famed ‘ghost cities’, Zhengzhou New District, was in

8

China Auditor-General warns on local govt solvency

In what certainly will not come as a surprise to daily China watchers, the country’s top auditor has issued a new warning about the solvency of local government bodies. The head of China’s national audit office warned on Monday that the country was facing growing risks because of a sharp rise in local government debt

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SocGen on China’s construction bubble

Societe Generale (SocGen) has released a fascinating 50-page research report entitled Chinese construction bubble – Preparing for a potential burst. The report argues that the exponential growth of real estate and infrastructure spending in China is unsustainable and a painful adjustment will occur sooner or later, although SocGen acknowledges that it is impossible to predict when the slowdown or correction

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China’s property bubble spreading

China Daily has published an interesting article, Record realty prices head to lower-tier cities, explaining how tightening measures undertaken by the Chinese Government to curb soaring property values in China’s major cities is causing bubble-like conditions to spread to second and third tier cities [hat tip World Housing Bubble]. Below are some of the key

16

Charting China’s five-year plan

Bernard Hickey at Interest.co.nz yesterday alerted me to an interesting presentation by the Brookings Institution on China’s latest 5-year plan, which has been widely discussed as focussed on sustainable growth and reducing inflation, rather than going for growth for the sake of it. The presentation contains a series of excellent charts summarising China’s progress and

25

Chinese soft landing: 1 in 3 chance

From Credit Suisse comes this must read report into Chinese bank debt, on and off balance sheet, and the likely fallout in the coming slow down. Rising risks to asset quality Our analysis shows China’s credit-to-GDPhas risen to alarming levels in the past two years due to massive off-balance-sheet financing. Market has only focused on banking

27

China and the future of capitalism

Let’s try some more scenarios, but this time with your participation. My reasoning is this. Most economic and financial commentary is about telling the story of the past leading up to the present. So why not try to tell the story of the future? After all, that is what matters for investment and policy. Can’t

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Wolf debates Stevens

Today Martin Wolf of the FT joins the growing ranks of China skeptics. It is interesting to contrast his views with those of Glenn Stevens, enunciated in his speech yesterday. According to Wolf: Until 1990, Japan was the most successful large economy in the world. Almost nobody predicted what would happen to it in the succeeding

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Chinese inflation bubbles on

From Bloomberg (h/t The Lorax): China’s inflation accelerated to 5.5 percent in May, the fastest pace in almost three years, and industrial output grew more than economists forecast. The annual gain in consumer prices matched the median estimate in a Bloomberg News survey of economists. Production rose 13.3 percent last month, the statistics bureau said in

1

Money supply growth tumbling in China

The People’s Bank of China has published the latest set of monetary statistics for May 2011. At the end of May, M2 money supply reached RMB76.34 trillion, increasing by 15.1% yoy, lower than 15.3% yoy growth last month, and continued to dip below the pre-crisis average growth rate.  The market consensus looked for a 15.5%

11

Chinese banks feeling the heat

Following on from last night’s post on S&P’s recent report on China and commodities, the Royal Bank of Scotland (RBS) yesterday released an interest report (available below) on the precarious position of the Chinese banking system. Here are some key extracts: Chinese banks’ aggressive credit expansion in the past two years greatly facilitated China’s strong economic recovery

11

S&P on a China disaster

Late last week, Standard and Poors (S&P) released a 22-page report entitled The Potential Risk of China’s Large and Growing Presence In Commodities Markets, which warns that record high commodities may represent an unsustainable bubble at risk of correcting in the event of a significant slowdown of the Chinese economy  (hat tip Interest.co.nz for the

3

Chinese shadow banking

Exclusively from Michael Pettis newsletter: My SWS associate Chen Long tells me that last week’s markets indicate that monetary conditions in China are still pretty tight, as measured by the cost of short-term liquidity in the interbank market. As I have argued before, I think this says a lot more about the extent of domestic

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This time it’s different in China

From Project Syndicate today comes this piece from Stephen Roach (who I do admire) on why this time it is different for China. I’ll give a peremptory hat tip to anyone that can debunk all ten… Here are ten reasons why it doesn’t pay to diagnose the Chinese economy by drawing inferences from the experiences

11

The great Chinese inflation

From Societe Generale overnight comes a new intensive study of the changing composition of Chinese inflation and how it will radiate outwards. Fascinating reading and essential knowledge for every Australian. Remember the phrase: “deflation in all you own, inflation in all you need”…

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China’s hidden debt

Niall Ferguson coined the term “Chimerica” to characterise the economic relationship between China and the United States. In his view, China does the saving, and the United States does the spending.  This is true to a certain extent but that does not mean that China does not borrow. Today, I want to explore debt in the

18

China not slowing enough

The People’s Bank of China has raised interest rates and reserve requirement ratios a number of times since last year as the government pledged to make inflation fighting and property price curbing their top priority.  So far, the two main objectives have not been achieved.  However, the effect of tightening has been increasingly visible. For

4

Chinese inflation spreading

Exclusively from Michael Pettis’ newsletter: Quite a lot of data came in this week as I was recovering from the jet lag generated by last week’s trip to the US, and for good measure, the PBoC then raised minimum reserve requirements Thursday evening. I don’t have much to say about the hike, beyond what will

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China is different

  We need a new framework for understanding and interpreting what is happening in China. As a friend recently commented to me, there should be three categories of economies: developed, developing and China. China may struggle, but it will struggle in a uniquely Chinese way, and inevitably pose deep questions about the future of capitalism.

6

World Bank warns China (Canberra)

The World Bank has damned the lifeboats in its China Quarterly Update and called out multiple risks including a housing bubble, inflation and external imbalances. Here is the money excerpt: Inflation is unlikely to escalate but there are risks. Food price increases seem to have slowed for now, sequentially, and the (yoy) rate of increase in

3

Pettis on yuan

From Michael Pettis this week: On Friday last week the National Bureau of Statistics released the eagerly anticipated first quarter data.  As has been widely reported, first quarter GDP was up 9.7% year on year. CPI inflation 5.4% in March, a 32-month high, and up from 4.9% for the first two months of this year.  For the first

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A warning to Canberra

From the ANU’s East Asia Forum comes this sobering assessment of the challenges facing the Chinese economy: China recently wrapped up the National People’s Congress (NPC) and Chinese People’s Political Consultation Conference (CPPCC) with the approval of the 12th Five Year Plan (FYP) (2011-2015). At the top of the new blueprint is a commitment to

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Roubini calls time on China (part 2)

Earlier this month, Houses and Holes posted a report from Professor Nouriel Roubini warning that the Chinese economy is overheating and risks a sharp slowdown sometime after 2013. Now Professor Roubini has followed up with an article on Project Syndicate fleshing-out his views in greater detail. Professor Roubini  more or less supports earlier warnings from Michael Pettis and prominent China

7

China’s leading indicators

Here’s a heads up about the important Chinese data that is out around lunchtime today.  Amongst the raft of data to be released is the GDP data. Chinese growth is increasingly important to everyone on the planet as our beloved Central Bank Governor pointed out in New York two nights ago. The chart below shows the

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Moody’s downgrades China’s property sector

Just in, credit rating agency, Moody’s Investor Services, has downgraded China’s property sector to negative from stable, citing both falling property sales and prices [my emphasis]: Hong Kong, April 14, 2011 — In a new report, Moody’s Investors Service changes its outlook for the China property sector to negative from stable. The change reflects the

5

Beijing down 29% ?

On new years day of this year the Chinese government announced that it had a new plan for housing China’s central government will strengthen its campaign to control soaring housing prices in 2011, a senior official said on Wednesday. Minister of Housing and Urban-Rural Development Jiang Weixin told a national work conference that the government will