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When Will China's Bubble Burst?
As Bloomberg notes,
Marc Faber thinks China may crash in 9 to 12 months, and hedge fund
manager Jim Chanos and Harvard University’s Kenneth Rogoff are also
warning of a crash.
Nouriel Roubini told
Bloomberg:
In China, where property prices rose
at a record pace in April and consumer prices climbed at the fastest
rate in 18 months, the economy faces the risk of a “significant
slowdown,” Roubini said.
“China should be
tightening monetary policy, increasing interest rates and let its
currency appreciate over time,” he said. “They are too slow, they are
not doing it fast enough.”
On April 20th,
BusinessWeek wrote:
China’s
Shanghai Composite Index may drop as much as 6 percent after breaching
the 250-day moving average for the first time in a year, Shenyin &
Wanguo Securities Co. said.
The benchmark gauge plunged 4.8
percent to 2,980.3 yesterday, the most in eight months, on concern
government measures to curb real estate speculation will slow economic
growth. The index may extend losses until reaching the next support
level of 2,803...
Yesterday, Calculated Risk noted
that the Shanghai composite is continuing down:
Keep
an eye on the Shanghai index (in red). It appears China's economy is
slowing.
This
graph shows the Shanghai SSE Composite Index and the S&P 500 (in
blue).The SSE Composite Index is at 2,622.67 mid-day - down
about 300 points from 2 weeks ago.
[Click here
for full chart]
Vincent Fernando notes
that Beijing property prices are starting to fall rapidly (and that
Shanghai is next), as China clamps down on the property bubble.
As
MarketWatch notes:
China's
economy is teetering on the edge of a major slowdown ... according to a
noted China strategist.
David Roche, an economic and
political analyst who manages the Hong Kong-based hedge fund
Independent Strategy, says the world's third-largest economy is now on
the brink, faced with the inevitable reckoning that follows an extended
bank-lending binge.
"We've got the
beginnings of a credit-bubble collapse in China," said Roche,
predicting the economy will likely cool from its stellar double-digit
growth rate to a 6% annual expansion as a result.
While
that may not sound bad, Roche believes the collateral damage from the
cooling will be anything but mild, as the banking sector comes under
pressure from cumulative years of bad investment and mispriced capital.
***
More worryingly, as bank lending dries up, there won't be the firepower
to sustain new investments in infrastructure, eroding a core pillar of
China's growth model, he said.
Much of the
focus on potential asset bubbles in China has been on the property
sector, but Roche suggested that housing-price inflation is intertwined
with unsustainable gains in other areas.
***
He said
government efforts aimed solely at property prices will prove
ineffective."What they are trying to do is
ration the amount of credit to one sector, that won't work. Roche said.
"The bubble will just burst in its own way, you don't control this."
He also said that China's rising middle class
could be stung with "real panic" when leveraged purchases go sour.
As Northwestern University's Victor
Shih points out, the Chinese government will slowly reveal more and more
of the true ratio of bad loans to good loans, and raise its figures
for local government debt. Shih says that recapitalizing Chinese banks
to cover losses for the bad loans will eat up more and more of China's
reserves.
On the other hand, Citigroup, William
Chen and Gus
Lubin point to various signs
that the bubble is still in the mania phase.
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Is China propping up the Euro at 1.26?
sell AUD
Amen to that. AUD set to implode.
John Paulson bullish about California housing prices. Sees recovery. We know we can all trust andybody with the name Paulson.
http://www.ft.com/cms/s/0/7db0d2cc-5c86-11df-bb38-00144feab49a.html
Hard to believe that US markets can do well with China in a (http://www.socialnews.biz/tag/China) free fall I think the move into US equities is temporary. Money is flowing out of emerging markets but soon people will realizus is not safe either.
Napoleon had his Waterloo. Leo is having his "Chinese Solar."
By the way, the current Solar Tech, will be absolite in 5 to 10 years. There will be new materials, new process of getting the solar energy. Just think of Semiconductors back in the late 60's, did anyone predict the Intel will be "it" ?
It's not the production facilities that make a solar firm prospects look good but rather the ability to develop new tech (yeah, how many of those were actually developed by the CHinese)
or low p/book values (little of those firms have book values.)
While the US is still trying to figure out its energy policy, I am putting my money on China taking the lead in alternative energy. I like First Solar (FSLR), SunPower (SPWRA), but the reality is they won't compete with China (unless they start manufacturing there too).
"Dubai times 1000" was Chanos' quote, and it probably will be...not necessarily b/c China's as irresponsibly managed and irrational as Dubai was (then again, how do we gauge such irrationality?), but b/c China's so deeply intertwined with the putrid, grandstanding mess that is the US economy that there's no telling exactly what will happen when their economy does blow? Will the RMB deflate? Hyperinflation? Social instability seems a given, but its effects on the rest of the world remain unclear to me--and whoever has it figured out isn't telling b/c they're about to make billions shorting everything under the sun.
Will China's housing look anything like the housing situation in the U. S.?
Housing never really improved – 10 charts showing the United States housing market is entering the second wave of problems. 1 out of 4 people with no mortgage payment in the last year are still not in the foreclosure process.Just want to let you all know that Mainland Tai Tais (wives) are still running wild at all of the designor label shopping malls in HK while their Husbands are off to business meetings at the Hotel Lisboa in Macau.
http://www.youtube.com/watch?v=svIMePEtBGs&feature=related
They would like all of you to continue buying giant flat screen TVs, iPads and electric salad spinners.
Maybe not all of them:
http://www.kansascity.com/2010/05/12/1940881/foxconn-defends-labor-pract...
You got that right!
It already did 2 years ago. Just take a look at those ahem* Chinese solars LOL
LOL, buy them Chinese solars at these levels while you still can:
New Photovoltaic (PV) and Concentrating Solar Power (CSP) Technology Roadmaps 11 May 2010 Solar electricity could represent up to 20% to 25% of global electricity production by 2050. This important finding emerges from two new IEA studies: the solar Photovoltaic (PV) and Concentrating Solar Power (CSP) roadmaps launched by IEA Executive Director Nobuo Tanaka in Valencia, Spain during the Mediterranean Solar Plan Conference hosted by the Spanish presidency of the EU. read more... Solar Role in Decarbonising Electricity Sector 11 May 2010 IEA Executive Director Nobuo Tanaka gave a key note address during the opening session the Mediterranean Solar Plan, organized under the Spanish Presidency of the EU and led by Pedro Marin Uribe, Spanish State Secretary for Energy. Delegations from Algeria, Egypt, France, Germany, Greece, Italy, Morocco, Mauritania, Portugal and Tunisia attended. read more...Suntech Power Holdings Co., the world’s largest maker of polysilicon solar-power modules, may team up with Israel Electric Corp Ltd. on solar-power projects, Israel Electric Senior Vice President Yakov Hain said.
yeaaahhhh....no. I've been short SPWRA and ENER for months now btw.
Bloom energy's bloombox is going to blow this stuff out of the water. HOWEVER, I am planning on installing solar panels on my home when the cost/benefit makes sense. Then I might cover those shorts and maybe you'll be making some money.
Great insight leo, lol, yawn, roflofl.
----
Good to see mauritania getting involved, sure they dont have sealed roads, more then 3 ATMs in the whole country but you know they do run a decent shadow slaving system.
This might be a better link for your PV Roadmap.
http://www.iea.org/papers/2010/pv_roadmap.pdf
The Chinese gov't has the wherewithal to prolong the bubble for a long time. I can't imagine the gov't sitting on its hands to let the inevitable bust happen sooner rather than later.
Another article warning us of the big, bad Chinese bubble ready to implode? YAWN!@@@@@@@@@@!!!!!!!!!*&@!*@!!
Thanks, Leo, for my first laugh of the day.
This is how we re-balance the trade imbalance...bet on a China collapse.
Chanos and friends take their treasure and bring it back home to the good ole US of A.
Next.