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In 2005, after seeing the signs of irrational exuberance, ridiculously overinflated house prices far out-pacing salaries, and generally nonsensical statements coming from all quarters about how the market, obviously peaking, had nowhere to go but up, I strongly urged a friend who was thinking about selling his townhouse in Los Angeles, to unload it by April of 2006. He took my advice and sold the place as-is, taking a 30K hit from what he "could have got" rather than spend a few months fixing a few plumbing problems and renovating. He walked away from the deal with a sweet 120K profit. By June of 2006, the market had frozen up. Wil-e-Coyote had run off the cliff but his legs were still windmilling and he hadn't looked down yet. Prices were still high, but you couldn't unload a house to save your life. Then came the crash.
In 2008, I was convinced that China was a great market for investment. With practically unlimited human capital, a populace with a strong work ethic and educational focus, and a government full of smart technocrats not afraid to intervene to apply the gas or brakes of a partially-command economy, everyone saw big things happening in the Middle Kingdom. So I decided to spend a few months visiting and seeing the situation on the ground.
What I found was quite disturbing. Huge empty tracts of office space in downtown Beijing, Shanghai, Guangjo, Xi-an, Kunming. Burnt-out office towers in the capitol. Half-finished skyscrapers ringing the rusting Olympic complex. Smog so thick it turned noon into twilight. Apartment buildings tipping over due to nonexistant quality control and back-room deals greasing the hands of The Party and leaving average citizens out in the cold--or dead in freeway overpass collapses as trash-filled concrete supports crumbled.
After a few months I was convinced; China was headed for a major correction. Not immediately, but in 3-5 years.
Now, fast-forward to 2010, almost 2011. While the vivid memories of race riots in Urumuqui and other signs of trouble have faded from my immediate recollection, I cannot help but be attuned to the various strong signs of trouble constantly coming from the PRC. 5% inflation yet only lip service from the central bank in terms of controlling a dangerous credit situation. Wikileaks cables indicating that a very significant portion of China's purported GDP growth may simply be the same sort of "pig iron" quota-satisfying reports from the great leap forward. Signals that The Party is politically paralyzed by internal strife and kept from exerting the sort of regulating influence necessary to keep such a growing economy from overheating.
So, I am increasingly convinced; China is bubbly. VERY bubbly. A correction is coming, and I'm going to let my initial estimates of timing stand: 2 Years. Enjoy the party while it lasts, but I STRONGLY suggest you evaluate any business transactions and investments which depend on continued Chinese growth and prepare to bail out in mid-2012 at the latest.
Im not a professional financial analyst, but it doesn't take an economic genius to see the writing on the wall in cases like these. Put that space between your ears to good use. Watch the signals coming out of the Middle Kingdom and don't bury your head in the sand. There IS somewhere to go but up, and that somewhere is down. Waaay down.
China will be a world power, possibly THE world power, but it's a rocky road to get there.
Thoughts? Opinions? More quantitative analysis than my stupid hunches?
I think they are in the phase that the U.S. was experiencing in the Industrial Revolution. I believe China will be the next world superpower, but the road will be bumpy. Agree with pretty much you are saying. I think their college graduates are having problem finding jobs as well?
I want to visit China, never been there so I can't say too much.
China's economy relies entirely upon enslaving a labor class. As long as the incentives work, China will continue to grow. If they let a little communism slip into the mix by permitting unionization and expanding social welfare, they will be in the same pickle the rest of the industrialized world is. Ironic, huh?
Investing in China and China's economic growth are two completely different markets. China's investment markets could collapse and the country could still double or triple the world's growth rates.
Compared to developed countries, China still has a lot to develop, to go well. After all, China's vast land. Difficult to manage many, many things need to be perfected. China's economy is indeed a great impact on the world economy. However, most Chinese people lived a very poor life.
In 2005, after seeing the signs of irrational exuberance, ridiculously overinflated house prices far out-pacing salaries, and generally nonsensical statements coming from all quarters about how the market, obviously peaking, had nowhere to go but up, I strongly urged a friend who was thinking about selling his townhouse in Los Angeles, to unload it by April of 2006. He took my advice and sold the place as-is, taking a 30K hit from what he "could have got" rather than spend a few months fixing a few plumbing problems and renovating. He walked away from the deal with a sweet 120K profit. By June of 2006, the market had frozen up. Wil-e-Coyote had run off the cliff but his legs were still windmilling and he hadn't looked down yet. Prices were still high, but you couldn't unload a house to save your life. Then came the crash.
In 2008, I was convinced that China was a great market for investment. With practically unlimited human capital, a populace with a strong work ethic and educational focus, and a government full of smart technocrats not afraid to intervene to apply the gas or brakes of a partially-command economy, everyone saw big things happening in the Middle Kingdom. So I decided to spend a few months visiting and seeing the situation on the ground.
What I found was quite disturbing. Huge empty tracts of office space in downtown Beijing, Shanghai, Guangjo, Xi-an, Kunming. Burnt-out office towers in the capitol. Half-finished skyscrapers ringing the rusting Olympic complex. Smog so thick it turned noon into twilight. Apartment buildings tipping over due to nonexistant quality control and back-room deals greasing the hands of The Party and leaving average citizens out in the cold--or dead in freeway overpass collapses as trash-filled concrete supports crumbled.
After a few months I was convinced; China was headed for a major correction. Not immediately, but in 3-5 years.
Now, fast-forward to 2010, almost 2011. While the vivid memories of race riots in Urumuqui and other signs of trouble have faded from my immediate recollection, I cannot help but be attuned to the various strong signs of trouble constantly coming from the PRC. 5% inflation yet only lip service from the central bank in terms of controlling a dangerous credit situation. Wikileaks cables indicating that a very significant portion of China's purported GDP growth may simply be the same sort of "pig iron" quota-satisfying reports from the great leap forward. Signals that The Party is politically paralyzed by internal strife and kept from exerting the sort of regulating influence necessary to keep such a growing economy from overheating.
So, I am increasingly convinced; China is bubbly. VERY bubbly. A correction is coming, and I'm going to let my initial estimates of timing stand: 2 Years. Enjoy the party while it lasts, but I STRONGLY suggest you evaluate any business transactions and investments which depend on continued Chinese growth and prepare to bail out in mid-2012 at the latest.
Im not a professional financial analyst, but it doesn't take an economic genius to see the writing on the wall in cases like these. Put that space between your ears to good use. Watch the signals coming out of the Middle Kingdom and don't bury your head in the sand. There IS somewhere to go but up, and that somewhere is down. Waaay down.
China will be a world power, possibly THE world power, but it's a rocky road to get there.
Thoughts? Opinions? More quantitative analysis than my stupid hunches?
China will go through the same growing pains that everyone else has gone through before them. Just look at Japan in the 70's to where they are now....and back then they were going to be controlling everything blah blah blah.
It's easy to look at China's rapid ascent but they've done so at some cost. (copyright violation, environmental damage etc. etc. etc.)
We will have to wait and see how things emerge. They are going to undergo a GREAT deal of internal transformation as well in the next generation or so....look how much the US changed from our industrial revolution to post WW2 etc.
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China still has a long way to go.
