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Between A Rock And A Hard Landing: Chinese GDP Prints At 2 Year Low As Inflation Still Persists

Tyler Durden's picture




 

Talk about being caught between a rock and a hard landing. China just reported (completely fabricated) Q3 GDP of 9.1%, which was the slowest GDP growth in the past 2 years and well below expectations of 9.3%, which has sent the Hang Seng index down to -3% on the news, and which confirmed that the Chinese economy is slowing... but not enough for the PBoC to release the spigots. Because just after the GDP data we learned that Industrial Production was chugging along at a relatively healthy 13.8% y/y vs Exp of 13.4% while new home prices gained in 69 out of 70 cities on the year. Unless China wants more spontaneous inflation "appreciation" days by its hundreds of millions of migrant workers, it will have to wait for its economy to cool even more before it does anything, meaning that even as it caught in a very unpleasant place, the aftereffects of Bernanke's inflationary exports are still keeping the economy hot. And those hoping that China will be the much needed growth catalyst (sure, we may get the occasional RRR cut but that will be all) will be disappointed. And because suddenly everyone is a China expert, yet doesn't realize that 9.1% is effectively the equivalent of 1.1% stall print in an economy where 8.0% growth is the minimum threshold for social order and stability, please read this.

China GDP:

And how the number was leaked 5 minutes ahead of the official release:

And a slightly more optimistic outlook on the situation, from Bloomberg's Michael McDonough:

Slowest GDP growth in two years takes China one step closer to easing, which still may be a couple months away due to stubbornly high inflation, Bloomberg economist Michael McDonough says.

 

Headwinds in the export market combined with tighter liquidity conditions will also act as strong headwinds against Chinese growth over the coming quarters.

 

Growth decelerating slightly faster than expectations all in an environment of no RRR/interest rates hikes since July, external conditions are deteriorating rapidly and liquidity for SMEs is drying up

Either way one thing is certain: hopes that China would appear like a White Knight to Europe's rescue less than a week ahead of the October 23 Summit, with a bailout package in hand, are now crushed.

 

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Mon, 10/17/2011 - 22:32 | 1783898 chump666
chump666's picture

Yeah it's under 9% with inflation on top, hence the sell off.  all bets are off on China now.  Enough of their goldilocks BS and white knight jerkoff, Copper will be decimated on Europe open.

EZ and China will implode at the same time.

 

Mon, 10/17/2011 - 22:37 | 1783919 RobotTrader
RobotTrader's picture

If you are correct, and copper is "decimated", then the PM's will fall 3x faster, and billions more scared money will flee into Treasuries and USDX at Warp Speed.

Mon, 10/17/2011 - 22:43 | 1783938 chump666
chump666's picture

100% correct.  USD will be hyper bid, silver/gold will drop hard.  The markets (equity) got to over bid, this should slam reality into them.  But yeah UST's will be bid as will USD.  Actually hard fall with stocks last session, but maybe lock in a 100 to 200 further drop

Mon, 10/17/2011 - 23:00 | 1783999 LongBalls
LongBalls's picture

Time to short the emerging markets. Again?

Mon, 10/17/2011 - 23:19 | 1784040 chump666
chump666's picture

Hang Seng.  ASX200, good plays, on 100-200 point drops...also on a good day a 100-200 rises.  But the China GDP mixed with the EZ is going-nowhere-trade.  Good volatlity puts/shorts futures

Mon, 10/17/2011 - 23:24 | 1784042 DormRoom
DormRoom's picture

probably.   If you look @ the bloomberg chart [1] (see above post), and draw a horizontal line @ 9.1% GDP growth, you'll notice that whenever China GDP drops below 9.1%, the economy loses momentum, and GDP drops @tleast 1.5-3% in the subsequent quarters.

 

9.1% seems to be the stall speed, and China is about to drop below it.

 

[1] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011...

Mon, 10/17/2011 - 23:48 | 1784085 chump666
chump666's picture

Then you have the real estate markets falling very hard i.e construction etc,  that has to be a big % of GDP growth. 

Mon, 10/17/2011 - 23:10 | 1784015 Dingleberry
Dingleberry's picture

For all you young ones out there playing with real money, let me clue you in to how the world works:  every few years or a decade, a "new" country comes on the scene and is supposedly gonna "take over the world".  It was Japan in the 80s. The Asian Tigers in the 90s. And now China.  Of course, all those nations imploded, and none of them are economically stable. They all must generate enormous trade deficits, just to keep their nose above water.  See a pattern here?? Their card ALWAYS get pulled.  And they lose their wealth.  Just some friendly advice from an old timer.

Tue, 10/18/2011 - 00:35 | 1784156 Mugatu
Mugatu's picture

Well said Dingleberry!

Capital can flow both ways.  Happens to all these "next big Superpowers".  What happens when China experiences their first quarterly investor outflow in a decade? Eventually its going to happen - sooner or later you hit the unforeseen bump in the road.  For an economy that has become accustomed to trillions funneling into their country, it will cause problems when the investor money goes dry.  Does everyone head for the exits at once?  Hard to say, but looks too scary for me.

Tue, 10/18/2011 - 02:07 | 1784249 AldousHuxley
AldousHuxley's picture

http://articles.businessinsider.com/2011-10-15/news/30282822_1_sharehold...

My Soapbox Advice to the OWS Movement and then?some

I may not know much, but I know a lot of it. So I decided to share my opinions and thoughts on what I would do if the OWS movement either elected me Grand Poobah or asked for my advice:

1. The Great Lie of Wall Street.

Every CEO tells the same great white lie. It is at the heart of every communication. It is at the heart of every financial decision. It is, at its very base, the reason why you all are in the 99pct and they are in the 1pct. The Lie ?

Great CEO ?White Lie = We are acting in the best interests of shareholders.

When a CEO utters this lie, everyone automatically forgives whatever they do. Add 10k jobless to the unemployment rolls? Sorry, we did it in the BEST INTEREST OF SHAREHOLDERS. ?Merge or buy a company and cut back across the board? We did it in the Best Interest of Shareholders.

The problem is that unless the company is losing money and it is the only way to keep the company alive, in this era of 9.1pct unemployment ?it NEVER is in the BEST INTEREST OF SHAREHOLDERS.

Shareholders, whether they own shares directly or through mutual funds or pensions do not live in a corporate vacuum. ?Their lives are impacted by far more than the share price of a stock. Every layoff in the name of more earnings per share puts a stress on the economy, on the federal, state and local governments which is in turn paid for through taxes or assumption of government debt?by&.wait for it.. the same shareholders CEOs say they want to benefit.

If OWS really wants to change corporate structure and impact the economy, talk to shareholders. Talk to your parents, uncles/aunts, cousins, friends who own shares of stocks either directly or indirectly and have them state loudly and clearly that they would rather have a higher Price to Earnings Ratio and even a lower stock price than have their TAXES increase in order to support all the people laid off from their jobs in the name of shareholders! ?

You might even consider buying a share of stock. Just 1. Maybe you can all pitch in and then go to a shareholders meeting and let them know how you feel about the best interests of shareholders.

2. ?Push to Make All Financial Institutions Partnerships

We should make all investment banks become reporting partnerships (meaning they still have the same reporting requirements they have today ). I would have no problem with our government loaning money to the partners of Goldman Sachs and Morgan Stanley and other Too Big To Fail Institutions so that they can buy back all public shares of their stock. Of course all those ?partners would become personally liable for repaying that money back to the government. ?It would probably be about 120B dollars in total to take these 2 companies private. That is far, far less than a possible bailout would cost.

Those personal guarantees would change EVERYTHING in the banking industry. It would change the decision-making process across the board. ? There would be a moral hazard to every decision. Today, a wrong decision and they vacation on their yacht. As a partner, ?the wrong decision and they are protesting right next to the OWS crowd as a 99pcter. ?It would be the definition of having skin in the game.

3. ?Limit the Size of Student Loans to $2,000 per year

Crazy? Maybe, maybe not. ?What happened to the price of homes when the mortgage loan bubble popped? They plummeted. If the size of student loans are capped at a low level, you know what will happen to the price of going to a college or university? It will plummet. ?Colleges and universities will have to completely rethink what they are, what purpose they serve and who their customers will be. Will some go out of business? Absolutely. That is real world. Will the quality of education suffer? Given that TAs will still work for cheap, I doubt it.

Now some might argue that limiting student loans will limit the ability of lower income students to go to better schools. I say nonsense on two fronts. The only thing that allowing students to graduate with 50k , 80k or even more debt does, is assure they will stay low income for a long, long time after they graduate! The 2nd improvement will be that smart students will find the schools that adapt to the new rules and offer the best education they can afford. Just as they do now, but without loading up on debt.

The beauty of capitalism is that people like me will figure out new and better ways to create and operate for profit universities that educate as well or better as todays state institutions, AND I have no doubt that the state colleges and universities will figure out how to adapt to the new world of limited student loan

Read more: http://articles.businessinsider.com/2011-10-15/news/30282822_1_shareholders-share-price-taxes#ixzz1b6vBlqmY

Mon, 10/17/2011 - 22:36 | 1783916 kito
kito's picture

Slowest GDP growth in two years takes China one step closer to easing, which still may be a couple months away due to stubbornly high inflation, Bloomberg economist Michael McDonough says.

 

right..easing...china has been the only ones doing the right thing by raising rates to fend off inflation. and it never crossed chinas mind that as a result of raising rates, growth might take a bit of a hit. lets put this slowdown into perspective, GROWTH IS OVER 9 PERCENT PEOPLE!!!!!

there will be no easing by china until there is a total deflationary/ deleveraging meltdown that would obliterate growth potential. easing at this point by china would ruin whatever little progress they have made against inflation. as it is, their currency move downwards in response to our senate bill will already cause them a bit of a headache. mcdonough dont knowenough......

 

Mon, 10/17/2011 - 22:43 | 1783935 Ramboy
Ramboy's picture

deleted

Mon, 10/17/2011 - 22:45 | 1783944 Tyler Durden
Tyler Durden's picture

China needs 8%+ growth to avoid a social revolt. Read the last sentence of the first paragraph above and especially the link. So while yes 9.1% on the surface appears big, it is on the margin an extremely precarious number, and anyone who thinks it is actually a big number in absolute terms will be more welcome at Business Insider than Zero Hedge.

Mon, 10/17/2011 - 22:47 | 1783957 Ramboy
Ramboy's picture

Social revolts only happen in nations with an immigration problem.

Mon, 10/17/2011 - 23:18 | 1784034 tmosley
tmosley's picture

I guess you never heard of the French Revolution.

Tue, 10/18/2011 - 08:17 | 1784556 Ramboy
Ramboy's picture

France has historically had lots of minorities

Tue, 10/18/2011 - 08:43 | 1784631 tmosley
tmosley's picture

You, historically, had a lot of lies, like that one, just there.

Tue, 10/18/2011 - 09:04 | 1784698 Ramboy
Ramboy's picture

France was the first nation in modern European to permit mass immigration.  Look it up.

Tue, 10/18/2011 - 09:09 | 1784708 tmosley
tmosley's picture

I looked it up, and you are a liar.

If you have actual evidence (not dumbshit assertions), feel free to post it.  Otherwise, get the fuck out, you fucking tard.

Tue, 10/18/2011 - 18:11 | 1787085 Ramboy
Ramboy's picture

Whatever dude.  Half of their national soccer team is from GUyana.

http://www.bpb.de/themen/YXOT02,0,Immigration_History.html

Mon, 10/17/2011 - 23:31 | 1784056 bankonzhongguo
bankonzhongguo's picture

Zhongguo has a 200 million "floating" population, a city-country standard of living disparity that would make the imported Soros frappuchino OWS crowd wince, a sex ratio of around 106 for child bearing years yielding a core element of 20 million potentially unemployed, (extremely) frustrated, rabble-rouser men for the PAP and MSS to worry about. 

Don't worry.  China's feudalism always implodes.

Mon, 10/17/2011 - 23:52 | 1784090 chindit13
chindit13's picture

Like Egypt?  Syria?  Libya?

Of course, given that Chinese need permission to move amongst provinces, I suppose that does qualify as "immigration".

Mon, 10/17/2011 - 22:52 | 1783976 kito
kito's picture

ouch...banishment from the lush verdant kingdom into the barren wastelands of BI. thats worse than chinese water torture......

Mon, 10/17/2011 - 23:33 | 1784060 tmosley
tmosley's picture

So some guy says you need to meet an arbitrary target on an arbitrary measure of economic growth to prevent "social revolt", and suddenly we just beleive it?  The statement may or may not be true, but the premises sure aren't.

Seems to me all they have to do to halt then reverse inflation is cut the dollar peg (and perhaps reduce their holdings of foreign paper).  Once they do that, the arbitrary figure of 8% lowers significantly, such that even nominally LOWER GDP is no problem, because they are producing goods for their own consumption, rather than toiling as effective slaves with the West gaining the fruits of thier labor for paper promising future paper.

I don't see the part where China's foreign reserve has disappeared.  It seems to me that that is the ONLY thing that anyone needs to look at.  All this other action is dumb Keynesian hand wringing.  The real fun starts when they realize this shit ain't working, a new guy gets put in charge, and he realizes what the only logical course of action is.

But hey, I'm no China expert.  Maybe all the members of the Communist Party there have been replaced by Goldman execs, and they will keep doing what they are doing until the last helicopter leaves the helipad atop the last bank building to fall to the rampaging hoards of peasants clawing for the blood of party officials who tukderjubs.  Maybe all that paper wil just burn up in the ensuing riots.  That just doesn't really make sense to me, not even POLITICIAN sense.

Tue, 10/18/2011 - 02:54 | 1784293 catch edge ghost
catch edge ghost's picture

Maybe. But that sounds rather like the musings of crystal ball gazing central planners. Maybe it's 8%, or maybe its -8%.  I don't know and I don't believe the experts know either. I have no doubts there are charts and stuff that supports the position, but I would bet that the West's intelligence apparatus has a better idea of when the Chinese will choose <chuckle> to revolt than do any economists. (See also: MENA)

I found Zerohedge about a year ago while sifting thru propaganda in left wing back channels. The same channels that over the last year or more have worked to quietly motivate the OWS folks.  I don't know who you people are and honestly I don't care. I think it's great, powerful even, that you attract wingnuts from a broad scope of political ideology.

I learned a new word today. post-partisan. I thought, hey, that's Zerohedge, and that's me. But when I read projections like 8% or EVERYBODY DIES, I wonder.  If Zerohedge, and like minded acolytes, are going to be the New Boss, am I just getting fooled again? 

What else can you see that mere mortals cannot?

Tue, 10/18/2011 - 07:49 | 1784478 tarsubil
tarsubil's picture

I feel like if you've ended up at Zerohedge, you should know by now that you trust no one.

Mon, 10/17/2011 - 23:13 | 1784025 Let them eat iPads
Let them eat iPads's picture

It's not real growth, it's the "building a bunch of empty cities and useless shit nobody needs" growth.

Gotta' keep up appearances.

Tue, 10/18/2011 - 01:21 | 1784208 Yogaman
Yogaman's picture

Maybe you can help me understand this better.  If china is both raising rates AND easing(which they are by devaluing their currency recently against the dollar), then isn't it pretty much a RMB valuation wash?  

Mon, 10/17/2011 - 22:36 | 1783917 Ramboy
Ramboy's picture

China must use Jewish accountants

Mon, 10/17/2011 - 22:36 | 1783918 Caviar Emptor
Caviar Emptor's picture

Don't bet on the future that was promised you. Goldilocks died in the West in 2008, and she's choking on her too hot congee in China. Unfortunately though this won't mean that a reset is imminent. TPTB would rather see a biflationary slow meltdown

Mon, 10/17/2011 - 22:38 | 1783927 Gene8696
Gene8696's picture

Maybe OT - but had to share this crazy Chinese shit. People just walking by a child that was run over on the street. These people are going to rule the world? Not my neck of the woods.

http://www.youtube.com/watch?v=UqVYUzHc5L8&feature=youtube_gdata_player

Mon, 10/17/2011 - 22:43 | 1783939 qussl3
qussl3's picture

Not all are assholes, but enough are.

A little more context is necessary i think.

This behavior has alot to do with the "Peng Yu" incident where a good samaritan named Peng Yu, stopped to help an old lady and got sued by her in return.

Courts found in her favor.

Now people are deathly averse to helping others because of that screwball ruling.

Mon, 10/17/2011 - 23:00 | 1783995 reader2010
reader2010's picture

 Junk me if you like but it reveals again and again the Chinese are junk. 

Mon, 10/17/2011 - 23:00 | 1783997 Putty
Putty's picture

I can't unsee that. That will haunt my dreams for many nights.

Mon, 10/17/2011 - 22:56 | 1783930 DormRoom
DormRoom's picture

?  I thought the 5 year plan targetted growth around 7-8% so the economy could better distribute wealth, and transform the economy for green tech jobs, and not be heavily reliant on infrastructure spending.  So China is on track to fulfill it's goal.

 

src:

http://www.google.ca/url?sa=t&source=web&cd=3&ved=0CCwQFjAC&url=http%3A%...

 

I still think China will have a hard landing, but she wil  wait for inflation to ease, before providing stimulus, by builiding up infrastructure in Western, and Inner China.  Also, she has to clean up the shadow banking industry.

Mon, 10/17/2011 - 22:44 | 1783940 Stuart
Stuart's picture

Nothing wrong with 9+% no matter how negative one tries to spin it......  solid number.   An avid reader but holy jesus man.... the negatve spin crap... enough already.

Mon, 10/17/2011 - 22:47 | 1783955 Tyler Durden
Tyler Durden's picture

And again...

China needs 8%+ growth to avoid a social revolt. Read the last sentence of the post above. So while yes 9.1% on the surface appears big, it is on the margin an extremely precarious number (likely far lower when one removes the government inventory-build up based goalseeking), and anyone who thinks it is actually a big number in absolute terms will be more welcome at Business Insider than Zero Hedge

Mon, 10/17/2011 - 22:51 | 1783971 qussl3
qussl3's picture

Yes China needs 8+% growth, but it depends alot on the composition of that growth.

The more that comes from consumption the better.

The headline number would be meaningless if it was all fixed asset investment.

To some degree, growth does appear to be shifting to consumption, how much of that is inflation is likely key though.

Regarding social breakdown, do not be so quick to call for revolt, China has a history of dealing with social unrest, and does so daily, her control over social media and fierce cultivation of self censorship may see the masses placid for longer than we expect.

Mon, 10/17/2011 - 22:57 | 1783991 Ramboy
Ramboy's picture

Closest thing most people here have ever seen of China is PF Chang.

Mon, 10/17/2011 - 23:20 | 1784010 qussl3
qussl3's picture

Your point being?

Do not underestimate the China's ability to keep the masses in line, or the faith the masses have in the CCP.

It may be shifting but nowhere near as fast as the west thinks.

Do you perhaps live among them?

Speak the language?

Looking at the menu PF Chang's doesnt even serve anything resembling any of the 8 regional fares.

 

 

Tue, 10/18/2011 - 03:39 | 1784318 spiral_eyes
spiral_eyes's picture

What people including Tyler are missing here is that it's not just China that needs 8% growth to avoid a social revolt.

It's America too — 8% growth would give all the #OWS kids a pretty good job.

Where would you rather be? 9.1%, or 1.5%?

All this means is China needs to bail itself out and will probably severely curtail buying (and also start liquidating) treasuries. That might be the pin that bursts the UST bubble...

http://azizonomics.com/2011/10/02/the-only-chinese-hard-landing-will-be-on-americas-head/ 

Mon, 10/17/2011 - 23:15 | 1784029 Gene8696
Gene8696's picture

As much as I respect you Tyler, i disagree. I have lived the last 5 years there... there will be no revolt. The government is fully in control of the masses. Shit runs like shit... And it is a health & safety nightmare. But government has control of the sheep.

More likely they will put the huge number of 18-30 year old "extra" men to work fighting someone.... If the masses get restless.

Tue, 10/18/2011 - 01:12 | 1784199 PY-129-20
PY-129-20's picture

As much as I agree with you on this, I would be careful to be too sure. China has a history full of such revolts and every Chinese CP member knows that very well. Surveillance techniques have changed dramatically since then of course and that might do the trick - but for how long? Does this include some provinces (another very Chinese thing)?

We have seen a lot of riots in China in the recent years - that does not make a revolt. For now, I'll agree with you. It is unlikely. But like Tyler says - if they are not able to keep up with the pace - all bets are off.

Tue, 10/18/2011 - 04:10 | 1784341 eaglefalcon
eaglefalcon's picture

are you living in a major city there?  i dont think the 18-30 year old there can fight

Mon, 10/17/2011 - 22:50 | 1783968 taraxias
taraxias's picture

The Hang Seng puking on a "solid number", imagine that........LOL

Mon, 10/17/2011 - 22:55 | 1783982 chump666
chump666's picture

Asian markets have been puking on every 'official' number

Mon, 10/17/2011 - 22:59 | 1783994 taraxias
taraxias's picture

That because they know every "official" number is fiction, not like here.....oh, wait....

Mon, 10/17/2011 - 23:02 | 1784004 chump666
chump666's picture

yeah...

Tue, 10/18/2011 - 00:51 | 1784057 chindit13
chindit13's picture

Try spinning this one:

In addition to what Angelina's beau said above me, compare the growth of debt relative to this GDP growth number, then factor in market interest rates just for good measure.  In the first six months of this year, new bank lending grew by nearly 40% of GDP.  In 2010, it grew 45%.  So that "growth"---even if it lowballs real inflation and is a fabricated number compiled by regional apparatchiks who don't want to deliver below Beijing's mandated growth number---looks rather inefficient.

Make yourself a spreadsheet.  Over every two year period double bank lending.  Add the "official" 18% two year GDP growth.  How many years can this continue before the economy is swamped by interest payments?  How "strong" is growth if it takes 5.5 yuan in debt to produce 1 yuan of GDP?  Heck, even Greece might be able to do that.  And please, do not raise the argument of "all those FX reserves", because that is no argument at all.  First understand what those reserves are, and also what impact they have on the monetary aggregates.

To top it all off, one has to have the faith of Job to believe Chinese credit analysis is so cutting edge that such massive loans could have all passed muster.  In the shadow banking system, now in excess of $1.5 trillion in size, interest rates range from 25-180%.  If you know how "9%" GDP growth can be expected to cover those interest payments, then you've got a job at EU Headquarters.

Mon, 10/17/2011 - 23:38 | 1784069 fourchan
fourchan's picture

so you belive the chinese's rosey numbers?

Mon, 10/17/2011 - 22:46 | 1783947 El Tuco
El Tuco's picture

My Chinese contact where I buy some of my product tells me that that this has been a very busy year for them (worlds largest factory of it's kind, won't tell you what they make). But unfortunately the factory made no money. He says very bad bad news. Factory make no profit.

Crazy...either someone is stealing it or they and the others in the same industry are going broke working at cost or less. Don't know which one.

So not all is well there. Have to start looking in India before China collapses.

Mon, 10/17/2011 - 22:50 | 1783967 Mike2756
Mike2756's picture

Wages and input costs are eating into their profits.

http://cnbusinessnews.com/neither-a-borrower-nor-a-lender-be/

Mon, 10/17/2011 - 23:27 | 1784052 Let them eat iPads
Let them eat iPads's picture

Hu Yu Fulin is back in Wenzhou - that's awesome!

Tue, 10/18/2011 - 08:10 | 1784532 DaBernank
DaBernank's picture

Whatever happened to Bang Dae Ho?

Mon, 10/17/2011 - 22:54 | 1783978 qussl3
qussl3's picture

China will start exporting inflation instead of deflation soon.

If we want the Chinese consumer to consume more the corollary is that everyone else eats less.

Mon, 10/17/2011 - 22:59 | 1783993 Ramboy
Ramboy's picture

The global ponzi will migrate to Africa to make your iphones, dollar store stuff and anal beads.

Mon, 10/17/2011 - 23:08 | 1784013 qussl3
qussl3's picture

Last i heard African were complaining of cheap chinese imports.

That and China exports her labor to Africa for infrastructure projects.

 

Mon, 10/17/2011 - 23:18 | 1784026 Ramboy
Ramboy's picture

Africa is to China what China was to the US in manufacturing.  Billions being invested there now.  Obama wants that $ to be invested..... in Flint, Michigan.

Mon, 10/17/2011 - 23:36 | 1784065 bankonzhongguo
bankonzhongguo's picture

Word.

Its been 10+ years of US China cold war in Africa.

That is one of the prime reasons all the Africa wars are getting started right now.

Mon, 10/17/2011 - 23:45 | 1784079 fourchan
fourchan's picture

on a crime train to ship the bad guys to and from flint, detroit and what used to be safe suburbs.

Tue, 10/18/2011 - 00:12 | 1784120 trav7777
trav7777's picture

africans won't work...why you suppose their continent is so fucked up?

Mon, 10/17/2011 - 23:12 | 1784021 geminiRX
geminiRX's picture

He make no profit because he owe giant loan shark

Mon, 10/17/2011 - 23:29 | 1784054 jdelano
jdelano's picture

Yes. Black market loans at 20%

Mon, 10/17/2011 - 23:54 | 1784097 chindit13
chindit13's picture

While wage increases play a part, what we might well be seeing is that Chinese corporate profitability had much to do with “extraordinary gains from real estate investments” and a whole lot less to do with gains from continuing operations. For much (all?) of corporate China, I suspect the factory output was just a loss leader, if they even knew the cost and revenue structure.

Mon, 10/17/2011 - 22:49 | 1783963 slewie the pi-rat
slewie the pi-rat's picture

note that the fact that the Q3 GDP numbers are (completely fabricated) does not mean they are incorrect

L0L!!!

at least the chinese accountants do not get their intructions in english

we hope...

 

 

Mon, 10/17/2011 - 22:51 | 1783969 monopoly
monopoly's picture

New, if you read the last sentence in the post I think it explains your error. 9% not enough and their market down 2% on that news.

Mon, 10/17/2011 - 23:00 | 1784000 Saxxon
Saxxon's picture

The PRC and the Party, it's collective mind, is too big and too Byzantine for any Lao Wai to get their heads entirely around.  But it is a good exercise to try.

We don't know how widespread social revolt would manifest itself in the PRC.  It already has out West - they cordoned off Sichuan, Xinjiang, Tibet whole towns.  They want their minorities to be smiling, dancing, costumed animals in a human zoo for the legions of new Han touristas to suck up on.

The Party will try to crush it, everywhere it springs up.  They will try to circumvent / silence media coverage.  It will be a horror show because in times like these govts. start to feel the heat and their one and only mandate is to survive.

There is NO MEDIA COVERAGE of OWS in the PRC.

Usually they love to point up US failings.  Not this time.  We do business in the PRC and we hear it's "dry wood" and subject to a spark...the Party doesn't want anyone to get ideas.

Tue, 10/18/2011 - 06:37 | 1784376 TGR
TGR's picture

That's not quite true about the OWS coverage - go to panguso.com and search in both English and Chinese and you will see just how prolific the coverage has been. Can agree on some other things though.

Just saying, as I don't make a habit of going round responding to these things, but for those of us living in China, some of the disinformative claims increasingly more people are making start looking a little over the top.

 

Mon, 10/17/2011 - 23:23 | 1784045 Caviar Emptor
Caviar Emptor's picture

You mean they might not all be eating more KFC and Pizza Hut like Wall Street promised?

I was lead to believe that all Chinese want to live exactly like Americans and that our tax dollars are helping to fund that effort! That's why they told us we've exported most of our manufacturing and industry: so they could work in sweat shops and make us all the crap we forgot how to make in return for us selling them our lifestyle! 

What's the matter with this whole stinking global ecoomy? 

Mon, 10/17/2011 - 23:49 | 1784087 chump666
chump666's picture

there you go, Chanos has got the play setting up on real estate falling

Mon, 10/17/2011 - 23:55 | 1784102 Let them eat iPads
Let them eat iPads's picture

I hope he's right, I look forward to those dirtbags imploding.

Tue, 10/18/2011 - 00:29 | 1784142 Mutatto
Mutatto's picture

Yeah,

I'm kinda tired of hearing about the Chinese and what a great machine they are.  Sounds just like the BS about Japan in the early eighties.  Guess what, debt and real estate took Japan down too!

I could never figure out where all this demand was going to come from in China, when they're all working for a fraction of the wages of the rest of the world.  Demand? sure.  Income to fuel that demand? Not so much.

Well, my theory is that EVERYONE CRASHES eventually, tha'ts called the business cycle.  It's not so different from the laws of nature.  The spirit of freedom is what makes America great, and that is why when everyone crashes, even the United States, The US is still on the top of the pile.

I just  wish Congress would figure out that w/o The Fed, we would have normal business cycles and NOT these SUPERCYCLES with the hangover that follows.

Tue, 10/18/2011 - 00:32 | 1784139 Pancho Villa
Pancho Villa's picture

Ominous. I've read that a good chunk of Chinese government revenue is derived from evicting peasants from land (which legally all belongs to the Chinese government) and selling long term leases on it to more affluent Chinese. If real estate sales drop, Chinese government revenues might also drop and they might have less money to buy US Treasuries.

Tue, 10/18/2011 - 01:50 | 1784232 Mike2756
Mike2756's picture

""The overall market is in panic as small mills have started to shut down some blast furnaces, while big ones are relying on their existing iron ore inventories and reduced buying," said an iron ore trader in the coastal city of Dalian."

 

http://af.reuters.com/article/metalsNews/idAFL3E7LI0KM20111018

Tue, 10/18/2011 - 00:31 | 1784110 chindit13
chindit13's picture

The SSE, once 6000, is below 2400 this morning.

The good news is China remains the world's "engine of growth";  the bad news is China has reverse engineered the Yugo.

Tue, 10/18/2011 - 00:11 | 1784115 Saxxon
Saxxon's picture

Caviar, the din of retail retail retail 24/7 in your ears over there is maddening after a while.  The Party wants that for its children; to be good producers and consumers.

There are a handful of KFC's, Starbucks, Pizza Huts in Beijing and Shanghai; maybe one or two in a few in the large outliers like Guangzhou and Chungqing; but none whatsoever in the medium-sized cities and towns.

Coffee is a non-starter in the PRC.  Nestle was over there well before Starbucks trying to convert the masses; did not work.  China drinks tea.

A cup of coffee costs your average Chinese guy or gal $15 on a relative basis and it's still not any good!

I want to short CMG to $50; particularly if they pin their hopes on a 'China Expansion' with that flophouse concept they came up with.

 

Tue, 10/18/2011 - 00:35 | 1784157 Caviar Emptor
Caviar Emptor's picture

I dunno bout you, but I'm on board with the kool aid that says they'll all wanna be tricked out in hip hop bling and droopy drawers any minute now just to be like Americans. They have too. It's the only way out of this mess. 

Bottom line: if they don't make cheap crap that Americans can buy on credit then the world as we know it implodes. We need to export services like credit cards with reward programs and they need to sell us smartphones. That was the deal!

Tue, 10/18/2011 - 05:25 | 1784343 TGR
TGR's picture

I wouldn't underestimate the proliferation of US chains in China. Baotou, boondocks city to a tee in Inner Mongolia, has three pizza huts in the main drag, all visible from each other. There are in fact more than 3,400 KFCs now across 650 cities in China - and YUM brands apparently claims to be opening one KFC in China every 18 hours. Pizza Hut had more than 500 stores in 120 cities as at Dec 2010.

Tue, 10/18/2011 - 08:44 | 1784637 reader2010
reader2010's picture

All those are joint-ventures that the Chinese control more than 51% stake.

Tue, 10/18/2011 - 09:18 | 1784736 TGR
TGR's picture

That's true for alot of chain stores and franchises in China, but not so for KFC - YUM owns 90% of KFC stores in China outright apparently,  so it doesn't have to split profits with franchises in the way it does in the US.

YUM as a company earns more in China than it does in the US.

Tue, 10/18/2011 - 00:14 | 1784118 champan250
champan250's picture

No. Hong Kong did not drop because of the GDP news. New World Development (0017.HK), a leading Hong Kong and China real estate developer, announced a USD$1.6B rights offer at 37% discount, this got the HK investors nervous about that even 17.HK is having funding trouble and usually this type of offering is signaling bubble bursting.

17.HK, an index component, is currently down 18% on this offering, real estate developers are down 7-10% across the board.

Tue, 10/18/2011 - 00:18 | 1784127 SHRAGS
SHRAGS's picture

 

Thursday, 15 March 2007, 10:24
C O N F I D E N T I A L SECTION 01 OF 04 BEIJING 001760
SIPDIS
SIPDIS
EO 12958 DECL: 03/15/2032
TAGS PGOV, PREL, ECON, SOCI, CH
SUBJECT: FIFTH GENERATION STAR LI KEQIANG DISCUSSES
DOMESTIC CHALLENGES, TRADE RELATIONS WITH AMBASSADOR
REF: SHENYANG 26
Classified By: Ambassador Clark T. Randt, Jr. Reasons 1.4 (b) and (d).

4. (C) GDP figures are "man-made" and therefore unreliable, Li said. When evaluating Liaoning's economy, he focuses on three figures: 1) electricity consumption, which was up 10 percent in Liaoning last year; 2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and 3) amount of loans disbursed, which also tends to be accurate given the interest fees charged. By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are "for reference only," he said smiling.

http://www.guardian.co.uk/world/us-embassy-cables-documents/100498

sourced orginally via wikileaks

 

Tue, 10/18/2011 - 00:20 | 1784129 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

Oh my God...just saw that poor child getting run over...that has truly fucked up my day. Just speechless...and fucking outraged

Tue, 10/18/2011 - 00:32 | 1784147 Mutatto
Mutatto's picture

I feel ya'

Read about that, saw the link for it......didn't watch it.

 

Tue, 10/18/2011 - 00:39 | 1784163 stateside
stateside's picture

Here come the China bashers again...retail sales and industrial production beat......growing at 9.1%....they continue to tell their citizens to buy gold and silver and their banks continue to buy gold and silver.  But let's bash them since they fell "WELL BELOW"  the 9.3% estimates.  Oohh how scary...well below LOL.  It's only .2%.  Too funny.  Too many China-phobes on here.  Wave that American flag LOL.  Go ahead and keep buying US Treasureis then....that will save ya.

stateside

Tue, 10/18/2011 - 00:52 | 1784171 chindit13
chindit13's picture

I'll repeat some of what I wrote above, as it no doubt qualifies as "bashing".  I'll await your refutation, and my education...

"....compare the growth of debt relative to this GDP growth number, then factor in market interest rates just for good measure.  In the first six months of this year, new bank lending grew by nearly 40% of GDP.  In 2010, it grew 45%.  So that "growth"---even if it lowballs real inflation and is a fabricated number compiled by regional apparatchiks who don't want to deliver below Beijing's mandated growth number---looks rather inefficient.

Make yourself a spreadsheet.  Over every two year period double bank lending.  Add the "official" 18% two year GDP growth.  How many years can this continue before the economy is swamped by interest payments?  How "strong" is growth if it takes 5.5 yuan in debt to produce 1 yuan of GDP?  Heck, even Greece might be able to do that.  And please, do not raise the argument of "all those FX reserves", because that is no argument at all.  First understand what those reserves are, and also what impact they have on the monetary aggregates.

To top it all off, one has to have the faith of Job to believe Chinese credit analysis is so cutting edge that such massive loans could have all passed muster.  In the shadow banking system, now in excess of $1.5 trillion in size, interest rates range from 25-180%.  If you know how "9%" GDP growth can be expected to cover those interest payments, then you've got a job at EU Headquarters."

Tue, 10/18/2011 - 01:25 | 1784210 chump666
chump666's picture

In the market bullshiters get bashed, I don't care if you are from Mars.  Point is China is one huge BS engine. 

Tue, 10/18/2011 - 00:59 | 1784180 Saxxon
Saxxon's picture

Chindit, excellent analysis and well-reasoned.  The PRC has yet to issue credit cards on a widespread basis.  Out there only the elite can get a cc.  The vast majority get and use what amounts to a pre-paid cc.

The Party can bully people with brute force but does not yet have the invisible latticework of spying, tracking, observing, monitoring, and electronically fucking up its citizens, that our great countries have developed for their free and noble people.

If and when they develop sufficient infrastructure (databases, FICOs, bar code tattoos, whatever it takes), a whole 'nother chapter may be written.  From what I see, the Party is already barraging the people, conditioning them to be mindless shoppers.  They have all the media and there is no opposition - opposition simply gets run over.  Thus, it is rather easy to see what they are doing.

Tue, 10/18/2011 - 01:09 | 1784196 chump666
chump666's picture

1.5% wipeout on copper!!!  Silver/Gold trading ranges are narrowing, that's a major sell signal anytime now

Tue, 10/18/2011 - 01:46 | 1784225 zorba THE GREEK
zorba THE GREEK's picture

I don't know how China will be able to sustain 8%+ growth with Europe and probably U.S.A.

going into prolonged recessions. The last recession, China had to keep their people busy

building cities full of houses that few in China can afford. There is only so much infastructure

they can build before they run out of money. Now China has to prepare for another world

slowdown and a housing bubble. It looks like we are in for hard times ahead, with a lot fewer

resources to help us through than we had in 2008-2009. 

Tue, 10/18/2011 - 02:04 | 1784246 boiltherich
boiltherich's picture

I never read anything that relates to Chinese economics or finance.  It is an even less democratic nation than we are, it has even weaker standards of accounting than we do, it's currency is manipulated in ways Wall Street envy, and the government does a great job of showing how it is in control just as ours does when neither really are, there is nothing, not one line of text, not a single data point that I could read or dream of out of China that I would trust. 

But because they and their production are now so much a part of the world economy it is a big reason why I simply do not care what is reported anywhere.  In order to calculate anything three needs to be three everywhere, standards have to be integrated and equal, if we are going to have a global economy we need global enforcement and standards.  Till then I invest nothing outside my own control, my own world, my own garden.  But what a delicious garden it is.

Tue, 10/18/2011 - 02:30 | 1784270 Davalicious
Davalicious's picture

This is what I got recently from an expat contact in China who has lived there this past decade. We were comparing China to Bangladesh. Bangladesh is booming at the moment with business switched from China and India. It would be better, but Bangladeshi banks are defunded due to local stock market losses (everyone is broke) and a multi level marketing fraud that took in the whole country (everyone is broke) - people are really gullable in Bangladesh.

 

"That sounds a lot like China, but they don't need to break another part for next time's repair, because anything made here will fail within a few years anyway. Perhaps the biggest difference here is that the more money you invest the more you will eventually lose. An added problem is the huge inflation here and the unwillingness of young people to work. They're lazy, inefficient, self-'insufficient', unproductive, can't cope with setbacks, are unable to learn and will leave for a dollar extra to a competitor. I have a friend with an IT company here who doesn't hire IT Bachelors anymore, because they can't even do basic data entry. The others leave the moment one of their friends gets a job at a big Chinese IT firm, to join him / her (and all of them will get fired just as easily of course). Another friend has a law firm, with a dual policy: foreign lawyers at the firm get training and support, Chinese none. Because the moment they finish a course, they leave for a Chinese firm. I think China will implode this decade, so no, I'm not here permanently (even if I wanted to be, I'll be kicked out once it implodes, that's one of the local traditions)."

Tue, 10/18/2011 - 02:59 | 1784297 caerus
caerus's picture

sell bitchez!

Tue, 10/18/2011 - 03:00 | 1784299 broke433
broke433's picture

Ching chow wha, me no understand... Btfd?!?!

Tue, 10/18/2011 - 06:48 | 1784400 moskov
moskov's picture

It's amazing America is having ugly revolution in its backyard, high unemployment, treasury bubble, the banks who would arrest you if you choose to close your accounts, millions relying on foodstamps and Chinese goods to survive would have the mood to discuss about Chinese implodes.

If China implodes, then enjoy your hyperinflation and dollar crash. All those ugly wave of US dollars will flood back into the US to finally eat up those 99%, including those 1% too.

China will still survive. Thanks. Because supply creats consumption, not the other way around

 

Tue, 10/18/2011 - 08:36 | 1784621 PulauHantu29
PulauHantu29's picture

Aussie Land will slow same time as their exports to The Middle Kingdom slows and their Housing Bubble will Burst also.

Easy money always results in a Big Pop.

 

Poor Kangaroos.....they're innocent in all this.

Mon, 12/19/2011 - 04:36 | 1993475 simoniddings
simoniddings's picture

The slowing of the GDP growth might just be what China needs now to ease inflationary pressures. Double digit growths are hard for any country to sustain, and the inflation that comes with growth is hard on its people who did not growth together with the economy. It just might be good enough for other developed nations to play catch up.

 

Simon Iddings - http://www.idpro.co.uk

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