It's A Boat, It's A Plane, It's The Great Wall Of China: Part Of Symbolic Chinese Landmark Collapses

Tyler Durden's picture

It's one thing for China to have a rather embarrassing episode during a boat launch, or even when demonstrating the pride of its airforce. But when a part of the Great Wall Of China itself collapses, literally, you know the proponents of the Chinese Soft-Landing scenario (leaving aside that copper is now down 10% for the week) may want to reassess their thesis. From China Daily, "The damaged portion of the Great Wall is located in a remote area near the county of Laiyuan in Hebei Province, about 200 kilometers southwest of Beijing. The area is home to a dozen small mines, with some operating as close as 100 meters to the centuries-old wall. Villagers and local cultural heritage protection officials told Xinhua that about 700 meters of the wall, which was built during the reign of Emperor Wanli during the Ming Dynasty (1573-1620), had already collapsed, and more walls and even towers are likely to collapse if the mining continues unchecked." And while this is admittedly a symbolic development, we follow up this news with a piece from SocGen's Albert Edwards who has some quite factual observations on why China is now in stall speed and has little hope of a Hollywood ending.

But first, more on this highly ironic development, which confirms just how little control over its economy the central government really has:

Zhou Jinjun, a deputy head of Laiyuan's land resources bureau, said the area where the ancient walls stand in Laiyuan has rich reserves of copper, iron, and nickel. Driven by profits, small mines proliferated despite the government ban.


A part of the Great Wall in Hebei's Chongli County was even demolished by a mining company to make way for road construction.


Zhou said law enforcement officials have found it difficult to completely stamp out small mines as mine bosses are armed with advanced communication equipment, helping them dodge law enforcement.


The State Council enacted a regulation to protect the Great Wall in 2006, banning people from taking soil or bricks from the wall, planting trees, carving on the wall or building anything that does not protect it. But experts and cultural heritage officials said the bans are poorly enforced in remote regions.


Guo said miners in Laiyuan did not knock down the walls, but mining at such a close range to the walls poses more serious threats.

And in more serious news, here is SocGen's Albert Edwards with a recap of his recurring opinion that China is due for a crunch of epic proportions:

Regular readers will know that I have a reasonable track record with the big calls over the years. All these calls had one thing in common. The markets got intoxicated with a good "growth" story that, with the benefit of rampant credit growth, became a full blown bubble.


And so it is with China. We listed recently the financial market historian, Edward Chancellor's 10 key facets of a financial bubble (see GSW, 24 June). After the US credit debacle, I find it perplexing that Chancellor's Rule 2 is so relevant for China - namely “A blind faith in the competence of the authorities”, in this case in their ability to soft-land the economy. For myself I cannot understand this confidence. A soft landing may indeed be the outcome, but it's unlikely. China is undoubtedly a severely imbalanced economy, suffering from creditfuelled investment and housing excesses that could easily spin out of control and crash, just like all the other "highly regarded" economic bubbles before it.




Our China economist Wei Yao believes the authorities are targeting a decline in property prices of 5-10% to appease this discontent. And she notes that, in September, the implied deflator for national residential housing sales rose a meagre 0.5% yoy. Wei also notes that the City of Wenzhou seems to be acting as a leading indicator as property prices have  already started to decline by 0.5% yoy (see right-hand chart above, incidentally I have been impressed with quality and clarity of Wei's analysis on China and comments on data. If you want me to put you on her list, just drop me an e-mail).


And therein lies the rub. If the authorities are trying to deflate property prices, why won't this cause the overall economy to crash, just as it did in the US? The answer is that it can and probably will. But I am sitting in my kitchen writing this with every single work surface covered in persuasive articles about why the economy will soft-land. Some economists are so reassuring. Even in 2006/7 when I was convinced disaster was around the corner I often found
their calm siren stories disturbingly reassuring.

The ironic thing, which virtually invalidates any economic data out of China, is a statistical representation which mocks the lack of volatility of an economy which is booming at an unprecedented pace:

China is a "freak" economy. To my knowledge no other economy in history has experienced such high investment/GDP ratios and seen so many sequential years of strong investment growth (see chart below). If you came down from Mars and saw an economy with an investment/GDP ratio of 50% you would conclude it would be among the most volatile in the world, not the most stable!

Albert proceeds to discuss last night's news of a major drop off in FX reserves:

There is one additional phase to the China credit crunch which recently arrived at the party (or wake). Foreign exchange reserves have stopped rising. They grew by a paltry $4bn in Q3 compared to an average monthly rise of $58bn in the first half (see chart below).

Why did China FX reserves growth stall in Q3? Many suggest capital flight may have occurred recently, but also the recent buoyancy of the dollar would have played a role, as less FX intervention by the PBoC will be needed to peg the exchange rate. We have been strong in our belief that growth in global foreign exchange reserves has been closely associated with buoyant EM equity and commodity markets. We have shown previously that the dollar's rally in mid-2008 and the collapse in the growth of China's FX reserves preceeded the collapse in commodity prices and EM equities in 2008 H2.

Obviously this goes back to a favorite theme of Albert's: the fact that China has to devalue the Yuan eventually. Sure enough, in the footsteps of Brazil's 2nd rate cut in 2 months, even China appears to be sending a loosening signal: last night the PBoC lowered the yield on 3 year bills for the first time in 15 months. Baby steps, yes, and next come RRR reductions, and so on, ultimately culminating with Edwards' prediction.

Yet it is his conclusion from today's piece that bears most attention:

Amid the growing risk of a trade war, one thing is clear: Chinese authorities are trying to softland a credit-fueled property/investment bubble. They may succeed at their own bit of cankicking,but history is not on their side. The sudden cessation of FX reserve growth (China's very own form of QE - see chart below) may well be the last straw to break the panda's back. And if China is hard landing, I agree with the bulls on one thing: expect the authorities to become aggressively stimulative. And if as is highly likely, aggressive conventional monetary and fiscal stimului fail to prevent a hard landing (as indeed was the case in the US in 2008) - "other" measures will surely include yuan devaluation.

This chart should be familiar to regular readers - it was a few short days ago that we presented the comparison of China's M2 and the SHCOMP, which led us to the same conclusion:

China M2 Change...

And M2 vs SHCOMP YoY change.

It remains to be seen how long until the SocGen strategist is proven right. In the meantime, expect far more pain for the symbol that once separated China from the evil outside world. Alas, if the decoupling thesis is about to break (once again) then the continued deterioration of the Great Wall will have that much more of a inherent symbolism.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mongo's picture

How do you say "collapse" in chinese?

Cynical Sidney's picture

move along nothing to see here, i'm sure the chinese mining authorities will move that stretch of the great wall to another hill nearby

AldousHuxley's picture



Coming soon.....The great collapse of China


Nothing new though. I've seen the collapsed sections myself when I there many years ago. That wall is too damn long.

Troll Magnet's picture

Couldn't happen to a nicer country.  Please everyone: Tell your wives and girlfriends to go buy a cheap designer knockoff to help out China.  Or any cheap piece of shit would do.

UnpatrioticHoarder's picture

It will be "collapse with Chinese characteristics".

smlbizman's picture

its those damn "mongrollrians"

AldousHuxley's picture

Around 300 feet of the wall in a remote part of Inner Mongolia has been irreparably damaged by Mongolian gold prospectors.


anyways mongolians still managed to invade china.

spiral_eyes's picture

in this thread:

angry americans throw insults at china — the most productive country in the history of human civilization — to cover up the fact that those nasty chicoms have totally outmanoeuvred america's inept leadership in the last 20 years. 

the chinese equivalent of zero hedge probably does the same thing with pictures of crumbling detroit, america's super obese 33%, america's young earth creationist 40%, and desolate former american factories. 

Troll Magnet's picture

come on, spiral eyes, it is china. it's not like we're making fun of good guys.

ForTheWorld's picture

I would clarify that by stating that it (the Wall) is too long for modern engineering and safety standards.

FEDbuster's picture

At least the repair is a "shovel ready" project.  Just remember when workers died while building it, they were buried in the wall itself.

Smithovsky's picture

Why everyone make fun?  No raffing matter.  

And mining company - you break, you pay!

Cynical Sidney's picture

for the last time 'Corrapse', 'raffing' that's all japanese engrish sounds nothing like chinese ding dong wangs

Dumb Honkie's picture

What a smart monkey, I'm so impressed.

Arkadaba's picture

I know but it is funny! Much harder to make fun of tonal languages :)

akak's picture

Not hard face-to-face, only in print.


cowdiddly's picture

Probably digging for precious metals. Since the wall represents the border, I would nt be suprised if the next related news item is about tunnels dug deep into Mongolia or whatever country this collapse borders. LOL

Seer's picture

Kind of like what Kuwait was doing to Iraq (which Iraq was complaining about, and which was likely the justification that it ultimately used to invade Kuwait)?

Oracle of Kypseli's picture

Both sides of the great wall of China is China

Temporalist's picture

Damnit...someone beat me to it.

Dumb Honkie's picture

 You can say "collapse"In Chinese either Dumb Honkie or albino monkey.

tekhneek's picture



Dumb Honkie's picture

A lot of Dumb Honkies here.

tekhneek's picture

one for sure.


nmewn's picture


I'm late to this...I was pre-occupied ;-)

Pool Shark's picture



Not Dumb Honkie,

Dumb 'Round Eye'...


Dumb Honkie's picture

How about   Dumb 'Caved-In'  Eye?

Troll Magnet's picture

As a fan of Asian ladies, I find their eyes to be quite beautiful.  But I would never date a Chinese chick.  Don't want the affiliation in any way.  It's all Korean and Japanese ladies for me.  

SteveGennisonBallWasher's picture

Just spit water all over my screen at work and made a large snorting sound, while choking.  Thanks oceanview... Looks like you pulled the Costanza, going out on a high note.....

eaglefalcon's picture

"we have an open election" = "we have an open erection"

Schmuck Raker's picture

+1 for you Mongo. Straight-men rarely get the credit they are due.

outamyeffinway's picture

Fuk me China is literally falling apart!!! LOL!

Id fight Gandhi's picture

What will keep he Mongols out??!

LongSoupLine's picture

Too late...Goldman's already in.

Pladizow's picture

He said Mongols, not Mongo-LlOYDS!

Oh baby, a 2fer, duh duh duh's and a Blackfein reference all wrapped up in one!

akak's picture

Yes, I hear that a recent genetic test has shown that Blankfein has a number of extra croney-somes in his genetic makeup --- which is, coincidentally, 99.6% identical to that of a serpent (the remaining 0.4% is presumed to be a mixture of cockroach, rat, leech, and tapeworm DNA).

Cynical Sidney's picture

let's see here, the mongols built nothing of value, they sustained themselves by looting other cultures, pillaging and killing to expand the mongol empire. i guess blankfein is a mongol after all.

AldousHuxley's picture

Well Mongols did invent the fiat currency.


The Mongol administration issued paper currencies from 1227 on. In August 1260, Kublai created the first unified paper currency with bills that circulated throughout the Yuan with no expiration date. To guard against devaluation, the currency was convertible with silver and gold, and the government accepted tax payments in paper currency. In 1273, He issued a new series of state sponsored bills to finance his conquest of the Song, although eventually a lack of fiscal discipline and inflation turned this move into an economic disaster in the later course of the dynasty. To ensure its use in circles, Kublai's government confiscated gold and silver from private citizens as well as foreign merchants. But traders received government-issued notes in exchange.  The paper bills made collecting taxes and administering the huge empire much easier.


Sounds like modern day America.



merizobeach's picture

I was in Mongolia this summer.  Fascinating place.  Perhaps the most progressive and worldly-minded of the Asian countries I've visited.  I guess when you have two nieghbors salivating over themselves about annexing you (and your uranium and mineral filled mountains), and the only reason they don't is because of each other, it pays to be wary of the outside world.  That aside, the women are among the hottest you'll ever see, and they're more like europeans than asians in their social liberation.  Take one on a dinner date, ask what she would like, and--cautious of our western diets--she is careful to specify, "something with meat".

You may also find yourself participating in strange conversations with locals...

Local man: What do you eat in your country?

My friend: Oh, we have the same meats, and we also have many fruits and vegetables.

Local man: So you don't have enough animals in your country?

My friend: No, we have plenty of animals, but we also like to eat fruits and vegetables.

Local man: No, no: we eat plants when we don't have enough animals: animals eat plants, and people eat animals.

Classic.  :-)

As for things of value produced in Mongolia, the pervasiveness of that free-range mutton was enjoyable.  And try living on that highland steppe without a yurt. 

AldousHuxley's picture

Mongolia is where you can find Asians with blue eyes


they make their own skis on the run and hunt reindeers


professional road warriors.


I'm looking for Mongolian ETF.