Guest Post: Why The Wheels Are Falling Off China's Boom

Tyler Durden's picture

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kito's picture

Zhè ji?huo shì wúnéng!!!!!

Greeny's picture

Yes, China could slow a bit, but what that "slow" very means? Instead of 10% growth, back to 7% or so? I hope someone can attach those falling off Chinese train growth wheels onto US train. Dark site: Bunch of lowlifes actually enjoying every drop in potential US recovery or anything that could be positive in some way.. Cheering up every point DOW drops, even Chinese is now under the target to satisfy total collapse fantasies. You not gonna get it, whatever you're betting on.. Got it? You are betting on World end, collapse, revolution and chaos and you gonna lose, all of you. Fair enough? Just watch and see.. Maybe tomorrow Bernanke will falsify Job Numbers and < 400k will show up? So much for conspiracy.. hah? I love to bet against depression people like most on this board.. Yeah, of course *Junk*.. what else is new.


Kito, you are probably the only positive person

in this "collapse patriots" club..

Mark Noonan's picture

You're ignoring the reality - a cruel and corrupt oligarchy running a dictatorship cannot get it right over the long term.  Heck, even a well-disposed tyranny is bound to blow it.  You can only get economic rationality in a free market - an economic and political free market.  China has neither; utter collapse is certain...the only question is how long it will take.

kito's picture

"cautiously positive"

vato poco's picture

you're in a casino. a fine, swank, brand new casino. glittering women, men dressed to the 9's. top hats & spats territory. you walk up to an open spot on the craps table. the dealer warns you, the boxman warns you, everybody losing their butts off warns you: "it's an ice-cold table! beware!" so you watch for awhile, and sure enough they're right: point, 7. crap dice. point, 7. so, not *wanting* to LOSE, you take a sensible strategy when faced with cold dice: you bet the 'don't pass'.

the cold rolls continue, everybody but you at the table loses their ass, but you make money. a lot of it.

then what happens? you're faced with a very hostile table glaring at you for cursing the (already cold) dice, and somehow spoiling the craps juju. so lets recap: you observed a cold table, and used a strategy to take advantage of that fact. does that make you a 'depression junkie'? or just 'a little less dumb than most'?

it appears to most careful observers that our economic titanic's hit an iceberg, and will sink soon. yet according to you, hopping onto a lifeboat is being a 'depression person'? good luck with that, bubba. that water looks COLD.

ZackLo's picture

2 drunks holding each other up and they just got done pounding the last bottle of everclear...and are about to get in a fight..

Djirk's picture

when China catches a cold....

Dr. Acula's picture

...the rest of the world contracts AIDS?


Fed_Printstone's picture

...the rest catch SARS? Bird flu? Melamine milkshakes?

TruthInSunshine's picture

OT -

Either ZeroHedge is getting billions of page views a day (maybe), is the target of DOS or other attacks by some pissed off Sellside ConPigs of Wall Street (but their probably too fat and lazy to initiate such efforts), or is the target of Government Internet Truth Squads (possibly).

In any event, I find Zero Hedge absolutely invaluable, as it has literally broken stories that have turned out to be 100% verifiably accurate, prior to any other source I know of, in any format, anywhere.

So, Zero Hedge, let me know how and where to send my anonymous tribute to further the interests of ensuring you stay online and secure, behind an impenetrable fortress of technological three-steps-ahead-readiness of those in the private and public sector who hate truth tellers.

Gold Man-Sacks's picture

I wonder what Peter Schiff's response to this would be.  He's diehard China all the way.

TruthInSunshine's picture

Advantage Chanos, who's quite the China bear.

I'm not a follower of anyone, but I can't deny Chanos has been far more correct than incorrect on his publicly spoken past predictions and general forecasts than anyone else who comes to mind.

Temporalist's picture

Where's Hugh Hendry to weigh in on this?

redpill's picture

Not really.  I had Europac put together a small international portofolio for me, and out of ~10 stocks only two were based in Hong Kong.

Just because Schiff sees China as undergoing certain changes (which will ultimately benefit them) does not mean he always sees Chinese companies as the best investments.

Gold Man-Sacks's picture

EuroPac may make custom portfolios, but Peter, himself, is extremely bullish on China.  He says it all the time on his show (can you think of another country he's more bullish on?).  Euro Pacific's first (and only at that time) mutual fund is called EP China Fund.



redpill's picture

That's true in a broad sense, that doesn't mean it's a blanket approval by him to throw money after companies or assets just because they are Chinese.


Whether this boom is turning into a swoon for the time being or not, long term where do you think it is likely more growth would come from if not China?  They have a massive untapped domestic consumer market that will eventually be far superior in terms of growth compared to the ever-declining west.


Manthong's picture

I don't know what Peter would say but as a business proposition, China likely can keep their ponzi going a lot longer than we can which makes them more of a buy now.

TruthInSunshine's picture

Take all of China's reserves and in consideration of where, how and when they derive their income and current surplus, that pile of money won't last long if there aren't enough jobs being produced to keep up with population growth, let alone a crisis which sees the unemployment rate gap up significantly for any extended period of time.

China is a ticking demographic time bomb.

topcallingtroll's picture

This huge set of "reserves" in us treasurys amounts to about 2000 dollars per person in china.  They are poor and eat snakes and rats.  You think they really like to eat snakes and rats?  Beef consumption has been increasing as they get wealthier.

China is still very poor and very desperate and very fragile in spite of  how some people may live in some of the cities.

hedgeless_horseman's picture

I have seen snakes for sale in Chang An food markets and elsewhere.  Never have I seen a rat for sale in a market.  

I am always impressed by the vegetable farms in the highway medians.  We have much capacity for that type of farming here in the USA.

I wish we could import the 45 minute shampoo for a $1.00, but Super Cuts will never make it at those prices.


As a sidebar, in regards to China, I suggest reading at the very least chapter ten of Tom Standage's excellent book, A History of the World in Six Glasses.  

MonsterZero's picture

I think a good US - China conflict will fix all these economic ills.

Sudden Debt's picture

5 to 1...


even Rambo and Chuck wouldn't like those odds...


Dr. Acula's picture

Chuck Norris makes onions cry.

Due to a genetic mutation, every cell in Chuck Norris's body has its own beard. 


VyseLegendaire's picture

Good article.  China is as done as the US, haha.

falak pema's picture

why you laffing? You will fall with the rest

TruthInSunshine's picture

I'm not laughing at China or the Chinese.

I do not wish them any ill will.

I do not and will not view the Chinese People as my enemy, despite my own government's best propaganda.

I know you weren't addressing your question to me, but I do believe the Chinese economic structure is very diseased, and has been built upon false long-term assumptions and ill-advised capital allocation decisions, and that the Chinese Government will have far less leverage than many believe in terms of dictating terms (for a variety of reasons I won't bother to expound upon here and now).

BigDuke6's picture

In Australia we observe China very closely and i can tell you predictions of its demise have been going around for about 10 years now.

Its getting closer but it may take a bit longer than many think.

Whether this is due to papering over the cracks par excellance we'll see by the size of their bust... whenever that may be.

luciusfargo's picture

Our government certainly isn't predicting an imminent demise. In fact, China alone is going to plug that $50b budget hole. Let the good times roll.

laomei's picture

Ah yes... the thing everyone has been saying for years and finding any excuse to hype up whenever they get the chance... China's not going anywhere.

buzzsaw99's picture

emerging. markets. bitchez.

TheFourthStooge-ing's picture

echo "emerging. markets. bitchez." | sed 's/emerging/submerging/'


Carl Spackler's picture

Throughout history, the kind of global confusion (China, US, Asia all broken) present today has led to significant outbreaks of war.

The next 10 years will be interesting times, to say the least.



M.B. Drapier's picture

I can't confirm its accuracy, but I found John Garnaut's "Is China Becoming a Mafia State?" talk eye-opening and scary. It features our old friend China Agritech among many other things. But the Fujin land war may be the scariest one, with no happy ending in sight. Talk about the problems of local government in China!

Dr. Acula's picture

>Mafia State

Kinda redundant, like "coniferous evergreen".


M.B. Drapier's picture

Did you watch the video? It's particularly not-redundant in the case of China.

Atomizer's picture

Universal healthcare and government subsidized nursing homes.

IMF working paper The Aging Population - 2002

Sudden Debt's picture

Point 10 is what is going to crash the chinese economy.

China is setting limits on investments on real estate, thus the rich guys are buying real estate outside the country.

Everything in silicon valey is being bought up by the chinese, so in Las Vegas, Florida, New York, Paris, Brussels,...

This capital flight is going to grind the chinese experiment to a halt pretty soon as local real estate markets will plumet down.


billsykes's picture

I say BS. Yes real estate is easy money, in booming times and building new stuff accomplishes all the gov't is trying to do. But what is really happening is that the Chinese look longer term, this generation may be cooked but down the road they are setting themselves up for a real superpower. Diversified investments all over the globe in resources.

They still have manufacturing, the US does not. The US unemployment numbers are BS, real unemployment is still around 20-25%+. As for china, well I just got back, guess what everyone has a job, I counted 9 bums in a city of 7m, here we have 1m people and 10k bums. Those Chinese bums were all very advanced age and some had no hands. Here, we have 20's early 30's all capable to work but they don't want to.

As per junky stuff, ya you wouldnt catch me on that new shanghai train, just google the NYT article about that, but also think of when "made in Japan" stuff was total crap.

Every rich person diversifies after they have made a certain amount of money, why not in passports?

$400B to go into loans to build stuff, ya sounds like a lot but in america, they just use it to shuffle and bailout financial firms that build nothing, that own nothing. And support new wars.

If I was on the other side of the table I would be more concerned about America getting desperate, desperate people do desperate things. You don't see china starting wars of terror.




Sudden Debt's picture

I don't like it a single bit!


But I agree with you 100%


Even if it does crash, they have the industrial base, and we don't.

Jim B's picture


If they are in trouble....  What does that make us....

Sam Clemons's picture

And as far as their citizens go, I believe they still actually at least BELIEVE in saving money. 

laomei's picture

Hahaha, the jinghu train is amazing and I already have my secretary waiting to buy tickets for it for my business trips.  Cheaper than flying and less of a hassle.  These trains represent the highest level of technology in the world and as much as you want to see it fail, it's not gonna do that.  High speed trains run on their own tracks and will relieve congestion on the normal rails while at the same time reducing reliance on flights.  This is a great thing.


When will the US get a train system that doesn't suck? Never, you gave all your money to the banks to piss away.  Haters gonna hate.

Sudden Debt's picture

China will soon start to price in their inflation on the products they sell as the state subsidising is getting to expensive for their govenrment.

This will bring inflation on a 5% monthly scale to us on imported crap.

Even Benny B. won't be able to hide that one.


TruthInSunshine's picture

I couldn't possibly know for sure, but given that Chinese TPTB are already considering outsourcing even more of their manufacturing to even lower wage Asian nations such as Vietnam, Thailand, etc., they are at least making serious contingency plans to try and deal with inflation while maintaining a high trade surplus (at least from a GNP, rather than GDP, perspective).

If the current trends deepen and become more entrenched, this is where the Chinese probably hope to counter Geithner's relentless pressure on currency revaluation, but they will still have to trade off domestic job growth even using this strategy, which is still a very, very high price for them.