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I wouldn't bet on it. The crash is already underway. China's command and control economy simply isn't up to the massive shifts required to make this kind of transition work.
Of course massive debt in China has been a worry for some time. But even then from Nomura: "A combination of a huge oversupply of housing and a shortage of developer financing is producing a housing market downturn that could drive China’s GDP to less than 6% this year." Slowing has to happen as China moves more toward their people and consumerism.
Of course much of this hard to tell, as solid information may not be so obtainable from within China. No doubt they are peaking in a relative sense. But the USA peaked, crashed and returned not too long ago as I recall. So this certainly does not have to be an end game with China. I suspect that within China huge amounts of unpaid debt can or will disappear due to their command-cronyism structure.
China does not need foreign trade to flourish. Except to import some raw materials that they cannot produce within their own borders. China has a great land mass, an amenable climate and geography, and a vast labor pool which is now highly educated. They could go fairly isolationist, and just keep on advancing their quality of life by intelligently applying their labor to their resources to yield consumer goods. Which is essentially what an isolationist America did a century or two earlier.
The USA could completely shut off trade with China, and the Chinese would just shrug and say, well, that was fun while it lasted, and just shift their industrial priorities from export goods to domestic commodities. For example, today China produces more automobiles than any other country in the world, and 90% remain in China, sold to Chinese consumers. It would have little economic effect on that sector if they never exported another car.
Even without the national debt, future still goes to China. They are going to be a super power with a large middle class, enormous buying power, and increasing influence. America cannot stop China from becoming the main competitor. We have to learn to live with China in this new geopolitical and economic reality.
Yeah? Middle class and china in the same sentence?
Since the average annual income for a family in china as of 2012 was 13,000 renminbi....$2,100 USD, I would say China is quite far from exhibiting a middle class, much less a "large" one.
Of course massive debt in China has been a worry for some time. But even then from Nomura: "A combination of a huge oversupply of housing and a shortage of developer financing is producing a housing market downturn that could drive China’s GDP to less than 6% this year." Slowing has to happen as China moves more toward their people and consumerism.
Of course much of this hard to tell, as solid information may not be so obtainable from within China. No doubt they are peaking in a relative sense. But the USA peaked, crashed and returned not too long ago as I recall. So this certainly does not have to be an end game with China. I suspect that within China huge amounts of unpaid debt can or will disappear due to their command-cronyism structure.
Well, I understand your point. But there are several issues that I feel make this an imprudent position:
1) Nobody really believes the Chinese GDP numbers. They are very suspect.
2) The debt ratios as a percentage of GDP are staggering, even before you factor in the shadow banking system that has cropped up, a system with zero controls. It's really the wild, wild west there. It makes Lehman Brothers look like a bunch of Amish elders.
3) The United States peaked, crashed, and returned. But the balance sheet issues the country faced in 2008 were much less severe. The other problem is that this credit meltdown will hit at the same time there's a demographic meltdown.
4) The Chinese writing off huge amounts of unpaid debt will totally destroy their economy. It would make the country a complete pariah in terms of lending, even as it will desperately need infusions of cash from overseas.
5) Chinese consumerism depends on there being jobs for the middle class. With labor costs rising so quickly, manufacturers are rather quickly changing operations to other countries, even reshoring some factory work back to the United States. The other sector in China besides manufacturing that ensures decent wages is construction. And we are facing an historic oversupply in that arena. China could go ten years in many cities without building another structure and still wouldn't absorb the oversupply.
Look, I'm not rooting for a crash of the Chinese economy. In fact, I would be really worried is such an event happened. However, all signs are pointing that way. I just think the prudent money needs to stay away from the place.
Yeah? Middle class and china in the same sentence?
Since the average annual income for a family in china as of 2012 was 13,000 renminbi....$2,100 USD, I would say China is quite far from exhibiting a middle class, much less a "large" one.
When the Chinese people have a wage and have a per capita GDP output similar to the USA, then they have arrived at the first world. This might take another generation, or 2. But I believe that it will happen. Possibly in my lifetime.
Well, I understand your point. But there are several issues that I feel make this an imprudent position:
1) Nobody really believes the Chinese GDP numbers. They are very suspect.
2) The debt ratios as a percentage of GDP are staggering, even before you factor in the shadow banking system that has cropped up, a system with zero controls. It's really the wild, wild west there. It makes Lehman Brothers look like a bunch of Amish elders.
3) The United States peaked, crashed, and returned. But the balance sheet issues the country faced in 2008 were much less severe. The other problem is that this credit meltdown will hit at the same time there's a demographic meltdown.
4) The Chinese writing off huge amounts of unpaid debt will totally destroy their economy. It would make the country a complete pariah in terms of lending, even as it will desperately need infusions of cash from overseas.
5) Chinese consumerism depends on there being jobs for the middle class. With labor costs rising so quickly, manufacturers are rather quickly changing operations to other countries, even reshoring some factory work back to the United States. The other sector in China besides manufacturing that ensures decent wages is construction. And we are facing an historic oversupply in that arena. China could go ten years in many cities without building another structure and still wouldn't absorb the oversupply.
Look, I'm not rooting for a crash of the Chinese economy. In fact, I would be really worried is such an event happened. However, all signs are pointing that way. I just think the prudent money needs to stay away from the place.
Oh I would definitely stay away at this point. Today there is not only too much risk, too many unknowns, and too many capital controls. But I would hope to make some good money in China or in Yuan based investments before I croak. If I don't maybe my kids will. I remain optimistic for China and the USA longer term.
When the Chinese people have a wage and have a per capita GDP output similar to the USA, then they have arrived at the first world. This might take another generation, or 2. But I believe that it will happen. Possibly in my lifetime.
Have you been to inland China? Like Wuhan or Chongqing? It is an ABSOLUTE SH**HOLE. I literally got sick just breathing the air on the streets for an 2 hours.
Have you been to inland China? Like Wuhan or Chongqing? It is an ABSOLUTE SH**HOLE. I literally got sick just breathing the air on the streets for an 2 hours.
As their central command directs China's movement more towards their people and consumerism, they will have to address many of the social issues as we did here in the USA over the past 80 years. Including cleaning up their environment. Right now China is comparable to the USA in the 1930's. If they are lucky they won't have a great depression or world war to deal with.
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