Guest Post: Be Optimistic (And Wrong) About The Chinese Economy

Tyler Durden's picture

Submitted by Zarathustra of Also Sprach Analyst,

When China started tightening policy to fight inflation, almost no one thought that it would slow the economy to what China is in right now.

When China started imposing ever more aggressive real estate prices curb, some people believed that that it would not make home prices drop (because there are many people in China, and urbanisation, etc), and even less believed that it would slow the economy to what China is in right now.

When China started to slow down more than most thought, almost no one thought that it could be a big problem, while some thought that the slowdown was “engineered” to fight inflation.  Because it was an intentional slowdown, not many people believed that it could get much worse.

After China’s shadow banking sector started blowing up, there is a bloke call Andy Rothman from CLSA who said there are “no shadow banks” in China.

After the slowdown “intentionally engineered by the government and the central bank” became consistently worse than expected probably since the start of 2012, consensus calls for recovery of growth in the next quarter.  They call the same thing every quarter since then, because there is “much room for policy easing”, “much room to manoeuvre”, “can cut rates”, “can cut RRR”, “can use US$3.2 trillion FX reserve”, etc.

After Wen Jiabao announced this year’s growth target at 7.5% in real term, most thought that China has never not exceeded the growth target, so GDP growth will most probably be above 8%, said the consensus.

Many have been denying emphatically the possibility of a hard landing.  Some like Qu Hongbin of HSBC even wrote that there is “no risk of a hard landing”.

So now, what do we have?

FT wrote that even 7.5% growth target looks “ambitious” to some.

On the whole, except that the real estate market is holding up better than we thought it could (yes, we did get that wrong, although we are not changing our view), the economy has been doing quite consistently poorer than the consensus, and occasionally even worse than what we thought to a point that at one point we thought we were not bearish enough, even as pessimists. 

Although real estate market is holding up better than expected, real estate companies’ profits have collapsed as expected and some overstretched speculators are facing negative equity.

Meanwhile, more and more risks from the shadow banking sector is surfacing, even in the formal banking sector.

Inflation has eased to a point that besides food prices, deflation is now a bigger risk.

Although the economy is not quite in a hard landing yet in terms of GDP growth (that is if you believe those numbers), for many companies and employees, it already feels like one.  For instance, Dong Tao of Credit Suisse painted a very grim picture:

It is evident that about 30-40% of manufacturing companies have closed doors or are considering closure in Guangdong and Zhejiang provinces, two of the largest export hubs for China.

Despite apparently high GDP growth, most had to learn a hard way in the past 2 or 3 years that stock market returns and GDP growth are not that correlated after all.  In fact, Chinese stock market has been destroyed.

The majority of people have consistently been too optimistic about China for the past year or two.  Digging deeper, we have not found much good reasoning behind those who insist on the uber-optimistic case, and most bullish arguments can be boiled down:

This is China.  China is different.  Don’t ask, just buy.

This is China. The government is omnipotent; the central bank has much room to ease policy, and has US$3.2 trillion FX reserve.

It is this common belief about the ability and willingness which makes those who were too optimistic too optimistic.  Being an optimist on China’s economy has been wrong, at least for the past year or so.

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gwar5's picture

China is going to suck when they run out of food.

BankruptBanker's picture

Well, they'll just eat the West then.

TrainWreck1's picture

I just like China articles for the "Date Chinese girls" banner ads they generate.


Pinto Currency's picture


A central bank blowing and collapsing economic bubbles in China has no different effect there than anywhere else.

Foaming the runway doesn't work when you are approaching at Mach 9.


Muppet of the Universe's picture

Now I know I'm gonna piss off a million retards.  But does it sound like I care about idiots? 

This is for smart motivated people who are endlessly looking for the alpha.


First off...  Fractional Reserve banking is unstable.  It is destined to fail.  So all fiat currency countries will collapse; it's only a matter of time before global war and the subsequent NWO. 

However, you shouldn't panic and bug out like all these ZH idiots and Alex Jones junkies are telling you to.  Wait for the shit to make first contact... 

This is currently the planning, trading, and prep phase.  You should be looking for the countries that will collapse last.

Greece for instance, will have it worst, b/c they have already collapsed, and they will suffer austerity and poverty, civil war, global war, and the NWO.


Never doubt the power of the hegelian dialectic.  ///

They will win.  So play their game, better than they, if you can. 

Personally, I think Allessio Rastani is a F'ing terrible trader.  But nonetheless, he motivated me to take action in defense of my capital.


Finally.  Never believe you will win the coming Civil War.  This isn't muskets vs. muskets or bayonetted rifles versus militiamen....

This will be semiautomatic armed, professionally trained mercs and soldiers conducting martial law black bagging tactics, global gps, spy drones...

Fuck it man, they have haarp and nukes.  They can F'ing make antimatter and have discovered the web of Space.

Make as much money as you can now, and simply leave as soon as you can.  Defending the muppets should not be a priority.

Do not listen to the posters here on ZH.  A few months ago, I would say differently. 

Today... well people broke rule #1... You do not talk about FIGHT CLUB.

As a final note, stop telling people to come here to ZH.  There are too many idiots these days. 

This used to be a respectable trading site...

+ music:


If there were a lesson to take from this collapse?  Work hard and pay attention. 

 Because there are smart men looking to take everything you have.  & you must crush them.

There is a time and place to fight.  & in defense of the muppets is NOT the time, and in America is not the place.  

You are more powerful with motivation, money, and knowledge.

So work on that goal, and one day you and your ilk will rule the world.  Will you be altruistically moral?  Or a follower of Rand? 

Well all I can say toward that: never make the mistake of supporting weakness.  We are in the Endgame, because of the Muppets' weaknesses.

If you never want to be where we are now, you must kill weakness everywhere you see it.  Strength is the master of success.



MikeMcGspot's picture

If you had two brain cells working toghether you would be dangerous.

Not believing this condition will occur  I  move on with confidence.

Perhaps I may be wrong, in which case I still move on with confidence.

When the condition happens we will either be alive or dead or some place in between.

Meet you at the in between time.



AnAnonymouses's picture

China going down like LA call girl on Beijing cock!

Zwelgje's picture

you have indeed already lost.


and now you take pride in being a traitor.

LMAOLORI's picture



You know how they say Socialism is the stepping stone to Communism?  Keep this in mind...


"Almost all of the current "growth"  is phony, comprised of the phony make work projects that have no economic value. When the Chinese collapse becomes clear, it will be viewed as one of the greatest financial and economic collapses in history. Naturally, it will be blamed on China moving "too rapidly into a free market economy." The truth will be the opposite, too much central planning from regulations to money printing that distorted the free market structure."

in full

The Coming Chinese Economic Collapse

gdogus erectus's picture

Damn, all I'm getting are these new "Break Wind Consultants" adds.

MikeMcGspot's picture

Smile and bend over.

Before you do that buy a cheap lighter like a bic and flame on for all your worth.

Chemistry and Physics.


HeadintheGame's picture


I live in China and I date Chinese Girls.  And beliveve me they are worth the risk of some serious deflation.

vast-dom's picture

''Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America's $16 trillion federal debt has escalated into a "death spiral, "as he told CNBC. 

And it could result in a depression so severe that he doesn't "think our civilization could survive it."

And Duncan is not alone in warning that the U.S. economy may go into a "death spiral."

falak pema's picture

In effect we are seeing a race to bottom as ALL protagonists are caught in the claws of Nemesis of financialised capitalism. We talk here about China, there about Euro collapse, beyond about US debt syndrome and it goes on to Japan decaying fast. 

Its all so interlinked, we don't know where the weakest link in the chain is but as the risk is now systemic to the nth degree it could come from anywhere. All those banks caught in the spiders web of OTC bets that nobody, but nobody, wants to unwind! 

Snap, pop, kaboom! 

Silver Bug's picture

The Chinese economy is plain and simply running on fumes.

MikeMcGspot's picture

The US owes China, we got food. We have to drop our requirement for 40% corn crop to ethanol, redirect our food to people who are hungry.

It is going to happen anyway as the price of corn continues to rise and ethanol plants stop bidding on product.

China should help cover our lay off cost at our ethanol plants, invest in them.

The craziness has to end or not, your call.

The New World Order is only bound by those of us who are here now and choose to decide.

Please leave your precincieved notions at the door.

This is reality.

How will you have it?


MikeMcGspot's picture

I will do everything I can to see that this does not happen. It is not necessary or reasonable that any scenario such as this should happen given our ability to influence direction of resources in this world. If you sir are looking to make this happen, i would be most happy to meet you anywhere for hand to hand combat, you bastard.

Barometer's picture

They can talk all they want about cutting rates. The fact is the hot money is flowing out. Ponzi schemes fail when the flow changes. This is going to be epic.

Element's picture

I don't get it ... if there are no Chinese shadow banks ... how can they have a shadow banking sector?

Anne Ominous's picture

The Chinese can eat gold - that is why they are buying so much.


Yen Cross's picture

 Did you guys catch this one?

  Small children should have adult supervision before viewing!  Slewie will have a hey-day with this one ;-)

ArgentoFisico's picture

And in the meantime italian Berlusconi tv "Canale 5" says in his news that GOLD IS NOW AT HISTORICAL LOWS (!!??!!??!!??!!??)


Link to the video on Canale 5 site (minutes 9:95 - 11:30):


Link to my article on argentofisico (physicalsilver):

Sorry, it's all in italian, but there is a translate button.

Marley's picture

Hey now, all you killers
Put you lights on,
Put you lights on
Hey now, all you children
Leave your lights on,
You better leave you lights on

'Cause there's a monster,
Living under my bed,
Whispering in my ear
And there's an angel,
With a hand on my head
She say I got nothing to fear

MikeMcGspot's picture

Angels are everywhere! Watch out for the ones who got a hand on your head and a knife at your throat. They are sometimes like that, I am not afraid of them for they are me.

caimen garou's picture

"intentionally engineered by the government and centeral bank" now where have I heard that and what country is'nt doing it? this is the US,the US is different, dont ask just buy!

Aquaman's picture

I suplised dey no hit glowth lates. You buy China Joe.

Duke of Con Dao's picture

correct me if I'm wrong but China is still a net exporter of rice. they will at least have rice. 

the news says no death penalty of KaiKlai... you know, wife of Bo. 

question: when's he going to pull a Nixon or Deng and return to power

5 years? or 7? 

Monedas's picture

Face-Kinis ?   More like head condoms !   Not sexy !  

BlackholeDivestment's picture

...hmm, drought, famine, unemployment, demand destruction, currency devaluation, oil price inflation, pestilences, earthquakes, tsunamis, floods, typhoons and hurricanes, tornados, solare flares and a Middle East about to explode as Europe implodes and China discovers it's own so called karmic abortion. 2012 looks pretty harsh so far, can't imagine what really bad will look like. Well, maybe a vacation in Demascus could ''change'' that. for beans, lol, that'll help bring the price of tea in China down. LMAO.

PrDtR's picture

SIMPLE!  Choose .. Yeshua.. there is NO OTHER WAY! 

Check out what the world renowned heart specialist Dr Maurice Rawlings had to say on the issue.. it might save your LIFE! the REAL ONE!!! 


Dr. Engali's picture

What can go wrong when you take people who have been working in rice paddies for generations and force them into cities and expect them to thrive?

MikeMcGspot's picture

Like so many of us, they may decide to band together and become a new force in manufacturing, start buying up world resources, being responsible, you know thriving. Moving billions from a quasi stone age existance many rungs up the ladder in short order.

Per my observation they have reached this great stage of achievement. They have ascended through multiple iterations of similar Western evolution in the current time as the West did for many centuries gaining their knowledge.

The common meme says we got to fight, so here is my challenge.

Who do you want to hang with, change the world with. Folks like Chineese?

Yep in my book.

Present a better argument if you can.






CheapBastard's picture

Good article.

My friend tells me the streets of Shenzen and Guangdong are no longer safe at night due to unemployed peasant unrest. You could not only be "mugged" but stabbed. This is very new to the people there who up until recently have experienced almost no violent crime. "Gated housing complexes" are more and more common and residents do not stray out behind their gates after the sun sets. Beijing and most other areas are still pretty safe according to him.


Any others have input first hand or from a friend.

Apostate2's picture

This is a long standing problem since 1980 and Shenzhen's designation as a SEC and the rapid increase in factory production. 'Migrant' workers or the preferred 'floating population' and crime associated with those who prey inside that population or outside has been going on for 30 years. It has spread to Guangzhou (even though it is a provincial capital) and those formerly village towns of Dongguan. Gated housing estates has been a response to this for the same period as is the dormitory housing of the workers. Shanghai is no longer safe nor any major city that has vulnerable (non-local i. e. 'migrant') population. I could tell you horrific tales of people who went to Shenzhen and disappeared and when reported to the local police they said ; 'Oh must be kidnapped for body parts'.

Having said all this it is the Central Planners and lack of the inforcement of law that is on the books but not realized in practise .This is what happens when the so-called monolthic state is unaccountable.

ArrestBobRubin's picture

What are we expecting of Chinese cities compared to the 20 most deadly US cities for a late night walk?

The crime rate there is tiny compared to the USA. The USA has more people in jail than China, meaning a crazy high per-capita rate of people being locked up. China has a population of 1.3 billiion. The USA? Our population is the .3 after their 1. They have 4X our population, and fewer of the people are incarcerated.

What's the point about China not being even more safe than it is, that it's not perfect there? Capitalism makes for haves and have nots. Some of the have nots resort to crime and violence.

The double standard when it comes to China is staggering. Perhaps this makes Americans feel better about their own violent crime rate and bankster-ruined future. That doesn't mean it's not silly and somewhat pathetic.

Lebensphilosoph's picture

The Chinese poor have less than the American poor who "resort to crime and violence". Clearly there is something fundamentally wrong with your analysis of the causes of crime.

falak pema's picture

You didn't read the whole thread; 

Cheap said one thing. To which he commented.

Your comment picks up the last part and neglects the implications of Cheap's original comment.

WHy don't you for clarity's sake provide us with YOUR enlightened view of the causes of crime.

It is always easier to criticize when one has never expressed one's own opinion. Be brave. 

Half baked philosophy and half a loaf of bread. 

Magnum's picture

Don't be too quick to believe China is going to crash.  Some food for thought--

A blogger that is part of a fairly popular Chinese language website in USA recommended a product my company sells.  Within 3 days we were completely sold out, many people were buying 6 of the same item.  Say what you want about Chinese, but the people BUY stuff.  

Go into a shopping mall.  If the Asian population is 8% in a given metropolitan area, the shopping mall customer base is 70% Asian.  You get the picture.  Don't even get me started on CASINO, if there were no Asians in America the casino business would evaporate.

Compare that to when our products are recommended by non-Asian Americans, in the various websites covering our industry, or even when we get a feature in a New York glossy magazine, we may get two dozen orders despite those magazines saying they have 2 million subscribers.

Are there any tv shows yet about "Hoarders" in China?

Shelby Moore III's picture

That anecdote has absolutely no bearing on the aggregate statistics indicating a hard landing. The consumer share of the chinese economy is very small. Selling out your item, is quite easy given 1.3 billion then some small % will still be a huge market for you.

MikeMcGspot's picture

Perhaps some folk from China will respond to my post, others may too, I will respond in kind as you cast it per my judgement. Maybe you got a good business plan and need some help to implement If the construt of your view it is something like "I win and you lose" please don't let me know just show up or give me an invitation to your place.

 Powers That Be should have a party.

My place or yours or we can do virtual or combination of such with the following agenda.

What creature are you? How will you have it? Do you have a choice? Will you throw down?

What's the real story? Do you buy it? Why?

Would you have it otherwise?

Michael P McGarrity

Minneapolis, Minnesota.

P.S. I am happy to share my real name and location.

BTW for any non US folks comming over please know that you can shoot some real guns for fun.

Yep, we do that here regularly, a tradation passed down through centuries from our mothers and fathers, all legal and such.

Anyway, got to go to work tomorrow and kick butt. Went camping in the wild the last few days.

Think about it.







orangegeek's picture

Communist China wisdom strikes again.  Pass the KFC.

Surrealist's picture

Speaking of China's real estate industry, have a look at this highly competitive business-building activity, lol....

Video: Real estate agents in street brawl


steelrules's picture

China may or may not crash? But I do have a small example of how things have changed over there.

I have a customer who travels to China every couple of months, his job is sourcing manufactures for different products, from toys to electronics.

In my last conversation with him when the topic of China came up the first words out of his mouth were "they are hungary over there", he said  companies that wouldn't give him the time of day in the past now give him the royal treatment to get any work they can.

Just my observations, for what they're worth.

laomei's picture

some people believed that that it would not make home prices drop - wrong, this was the entire point of it

there are “no shadow banks” in China. - not nearly as many as you are determined to believe there are

They call the same thing every quarter since then, because there is “much room for policy easing”, “much room to manoeuvre”, “can cut rates”, “can cut RRR”, “can use US$3.2 trillion FX reserve”, etc. - Yep, we got many more bullets in the gun and tools in the box to use.

 It is evident that about 30-40% of manufacturing companies have closed doors or are considering closure in Guangdong and Zhejiang provinces, two of the largest export hubs for China. - "considering" isn't closure, and there has been a massive push by the government to shut down low-value manufacturing with a shift to higher value manufacturing, welcome to planned factory churn.


Honestly, you idiots have no idea what you are talking about at all.

Surrealist's picture

Must be the same idiots that forecast the 2007 - 2008 US property bust. Didn't they look like a bunch of idiots back in the days prior? 

css1971's picture

Gambling in Macau is down. High end watch sales in Hong Kong are down. Steel is down. Iron ore is down. copper is down. Electricity in China is down.


China is going down. The balloon is well and truly popped.

Cosimo de Medici's picture

You certainly carry the water a lot for the Middle Kingdom.

I suppose "shadow banking" and its impact are a matter of degree.  At "only" $1.8-$2 trillion, one might try to argue that it is immaterial in a $5 trillion economy, but when supposed growth falls below the magical and mandated 8.88%, that 5-10% per month vig becomes more of a hurdle than faced by Liu Xiang at the recent Olympics, or so it would seem.

Now where has this money gone?  Could it be housing downpayments, so that lapdogs can try to argue that "Chinese put down huge downpayments, so housing has a cushion"?  Could these loans be secured---and hence get the "cheap" rate of 5% per month---because Mom and Pop and Uncle Wu put up their small businesses as collateral?

And this shadow banking financing...what is its source?  Is it loans from those major firms or SOEs who have access to China's non-shadow-banking system?  Is it also the semi Ponzi schemes where sharks promise depositors 10% on their money when they loan the deposits out at 5-10% per month?

Of course since China's stated growth generates more than enough return to service this usury, all will be well.  Those clever Chinese think looooooooong term, you know, like when they saved up their energy for two thousand years so that they could re-emerge on the world stage in about 1990, fully five hundred years after the start of all that heavy lifting called the Renaissance.  Now they're back with a vengence, and it's gun powder and noodles all over again.

Since I am one of those "idiots" who doesn't know anything about the economic miracle that is China, I'll await your smack down or else being cooled down with a bucket of that water you are carrying.