Was That It For The Great China Bull Run?

Tyler Durden's picture

For all those who believe China will continue carrying the world on its shoulders (we guess after yet another 2 week failed sting at US-based global growth "leadership", inverse decoupling is over yet again) we have some very bad news. None other than traditional permabull in all maters financial, Citi, has insinuated the sun may be setting on the great Chinese "growth case". 

Dow Jones reports:

Citigroup expects China's High-Speed Rail tragedy could mark "a possible turning point in the China growth model;" it says it's not clear currently what impact the accident may have on the planned leadership reshuffle next year, but the accident could become a painful lesson for officials. Citigroup says authorities may choose intentionally to slow GDP growth gradually but firmly to 7%-8% in following years and spend more time fixing problems created by artificially fast growth. Among individual sectors, Citigroup expects airlines will likely benefit near-term from reduced HSR competition, capital goods should soften a bit, unless the demand for automation/machinery due to wage inflation clearly outpaces the slowdown in investment, while commodities should be affected negatively if China slows infrastructure investment.

In other words: China is done importing US inflation. Needless to say, if Citi is even remotely correct, this is a revolutionary, even paradigmatic for all you scrabble fanatics, transformation that will push global growth materially lower, and will absolutely necessitate numerous rounds of monetary easing from the DM's central banks to offset the loss in Chinese "growth." What this means of DM currencies, and for their natural hard assets replacements, is all too clear.

h/t London Dude Trader

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Xibalba's picture

China selling USD 

johny2's picture

China is playing very well their game, they can still sell a few things to EU and others thanks to the exchange rate fixed to USD. And the Bernank, Boner, O'Bama are just there to keep us distracted.

StychoKiller's picture

I don't understand how it is that Citi became a permabull in "financial maters"!  The sexual proclivities of finances are not a realm that Citi should be expert in, IMHO!  :>D

johny2's picture

I think they are much bigger experts at the hiring escorts, IMHO.

Josh Randall's picture

No US jobs means NO money to buy Chinese goods  

CitizenPete's picture

When was the last time you stood in line trying to purchase something at an outlet Mall in Beijing?  You'll wait for half an hour for the privilege of buying a $600 purse for your wife. From my experience the Chinese are purchasing plenty of their own goods, yet they still enjoy growing exports to the world, only it's no longer "cheap" chinese goods -- it's "inexpensive" Chinese goods, because (even as a Comi country) they don't control the wage rates and businesses like the US does. Beijing might start putting their hand on your wallet for more fees, but face it,  the US government has their hands up our ass.   Enforcement of environmental laws, intellectual property rights, and safety regulations in China still appears virtually non-existent.  

Is the Chinese economy red hot?  Yes, I think so.  

Is there inflation?  Maybe more then anyone admits or understands, however much is tied to explosive growth and demand, while US inflation appears to be tied mostly to FED debasement of the currency to fend off deflation and maintain reserves.  

Will the Chinese economy implode? -- probably, but not yet. (Mises:"beware the boom") .  I beleive the run has a more to go and to think a train crash will act as some sort of wake up call to reflect on the speed of growth is a childish fairy tale at best.  

How many 1.2 million dollar apartments can Beijing possibly have? Many more, apartments are still hard to find.  The cost of food (on the street market) has gone up at least 40% in the last year, but you can still eat for about a couple dollars a day.  Wage inflation commeth, but most will be passed to the working US Bubba at Walmart along with more US import costs.  Suck it up Union bitches. 

Chinese consumers are buying 1.5 million automobiles every month (most for cash -not credit) and just when Reuters reports slowing sales in March, in April they climb over 5% again.  China has a long way to go.  IMO it's a third world nation of Millionares driving Audi A8's and Porsche Cayans, living in 2 million dollar apartments, yet some of the former "villagers" still squat and crap in the park.

If the US stops buying Chinese products (or if the supply is cut off), then the US stops buying any products (or they pay more from elsewhere).  The US does not and can not manufacture what they consume and need to sustain the countries infustructure.  China can and does comsume what they produce.  I have walked the material markets in Beijing for glass, stone, metals, SS, electric, etc... that go on for acres (as far as the eye can see.  I have never seen anything like it in the US anywhere.  From my view the US needs China more than they need our debt. 



Will local Chinese municipalites over extend themselves and default on loans?  Maybe some, but right now Beijing can bail out the local governments without printing any fiat money.  What is New Jersey, Illinois, California, etc... going to do?  I'll tell you - their going to start selling off the assets to countries like China and soon your downtown parking fee will also go to Beijing. 

One thing I know for certain: It's alot easier to start and operate a business in China right now than under the thumb of the US goverment buracracy.  In many ways China appears more Libertarian and Capitalistic in practice than the US was in the 1950s.   The US government now assures that you can't be profitable unless you get subsidies paid for by taxpayers and loans from the FED.  Hear that sucking sound? It's the combination of US government vacumming out your life savings while they blow Beijing. 

Three weeks ago a Jeep I was testing a product on in Beijing blew a radiator.  We had it replaced at a Jeep street shop at 11:ooPM in half an hour and they gave us cold beers while we waited for 4 guys to replace it.  Cost was about 40$, labor included.  The following week we had the fuel tank R&R'd (for test reasons), under 50 bucks. etc...  Imagine this happening in the USSA ?   

Chinese exceptionalism?  They appear exceptional in many cases, but it will not go on for ever. The guys living on the floor in the office of the Jeep garage will eventually be getting tired of scratching the bug bites on their legs.

jdrose1985's picture

When was the last time you made it out of beijing?

CitizenPete's picture

In the states now - I go back and forth.  

 Every time I'm in the USSA it looks like it became more communist, while the facts and practices on the ground in China look more and more Libertarian.  Don't get me wrong, I realize every now and then the government will swoop in and chop off heads (literally), but in practice there is almost zero enforcement of all these tough Chinese laws you hear so much about.  The Chinese economy has little concern nor tolerance for extensive rules right now. 

Going back to Beijing / Shanghai next week and staying for a month or so.  I hope to leave the US permanently some day - I don't want my kids fighting some final global war for a corrupted unconstitutional bankster country like the US.  If all goes well, perhaps I can live down the street from Jim Rodgers in Singapore. 


God bless the US Constitution, and damn the bastards in Washington and the Fed that destroyed America right in front of an inattentive citizenry.  Everyone is reaping what they have sowed.

dick cheneys ghost's picture

Note to China..........When Zimbabwe complains that "cheap chinese imports' are destroying their economy, you got a problem..........

TruthInSunshine's picture

Few 'gurus' are deserving of their 'guru' status.

However, never, ever try and fade the Chanos, bitchez.

China is literally a house of cards (as are most western developed economies, but for far different reasons).

China contraction on the menu, bitchez! (Maybe even significant YoY contraction - I said YoY, not month over month, so yeah, I went there).

Full power Chinese QE, when measured as a % of Chinese GDP, is going to be epic.

Final note - what happens when every developed and many emerging nations all try to devalue their currencies at once?

Devaluation War, bitchez.

Thomas Jefferson's picture

Dollar looks like a hot bag of garbage.

squexx's picture

The USA, Europe, China, Japan, etc... are all houses of cards! I keep reading calls for a crash this fall worse than 2008. I wonder if it has anthing to do with this headline. What better way to disguise a crash and deflect blame from the (Satanic Tribe) perps?!?

Pentagon Warning Order: ‘Prepare for War’ (By September?)

Mac Slavo
July 19th, 2011



Goldenhands57's picture

Whole new Cities built in Mongolia and similar..NOT a soul in them. Trains going fast to where? They have no clean water, even worse air pollution in the cities. Nothing can happen good from this, the Central Party is in a serious bind. The tide is moving out folks....soon enough you'll see the neked trooth..  I got zip going on in China..not one deal of any kind. Never felt quite at ease dealing with them.   

spear-x's picture

I don't think it is the tide. More like a tsunami drawback.

chump666's picture

That Citi report is very interesting and smart, the 'small coincedances that lead to a major event' theory.

LookingWithAmazement's picture

Wenzhou train collision = Hindenburg disaster

ml8ml8's picture

In case no one noticed, China is a really big country. They're going to have lots of accidents based on sheer scale alone.  If selective attention to one accident can cause that kind of political shift, it only goes to show the biases and issues inherent in central planning.

reader2010's picture

Jim Rogers once said the real threat that can derail the whole thing is the water issue that China faces. Other than that, it has way to go on for a whole lot longer.

BorisTheBlade's picture

Water was probably the biggest driver behind Chinese ocupation of Tibet as biggest rivers in China originate from the glaciers on Tibetan plateau. China no doubt takes water problem very seriously and should something happen to these glaciers, they will look northward at the biggest reservoir of fresh water across the border - Baikal. Rogers is right on money with this one.

CombustibleAssets's picture

The BDI has fallen and can't get up

StychoKiller's picture

Enuff to set yer hair on fire, huh?  :>D

LikeClockwork's picture

Are we forgetting hundreds die on Chinese roads daily? Most Chinese won't even have been informed of this little annoyance. Beijing says, Risk On.

Pretorian's picture

This is what u write as "Ciity" when 2 many people are biding for emerging countries equity.

max2205's picture

China and CitiBank are both a big bag of suck

karmete's picture

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