The Collapse of China May Be Near

[Armand2REP]

The M2 money supply can easily be rolled over with low(er) interest rates and also there is the hong kong economy to recycle unlimited amounts. One can also question the quality of the money supply. The problem with PRC is not simply for intellectuals to say the reason is [x]. The PRC is a like a greasy association of statistics.

The CCP only needs to massacre a few before all the PRC people line up. Who knows when and how much but they wont resist and it will be happen since CCP has control of the gun and the military and also on the information and how it is distributed. Look at what happens in Tibet, XIngjiang region and those are poor economical areas compared to the rest of the region. Further look at the huge corruption and take down of previous leaders (that shows the strengthening of the current leadership).

The people of PRC would not dare to say anything against CCP. Even look at the Soviet Union it was not economic and people but it was leadership struggle.

The CCP also needs to be given a little credit they have managed to build infrastructure and make good decision that makes the people feel good. Also the CCP leadership are not fools. They want to survive and still be in their seats tomorrow they wont give that up easily.

Sure there will be economic downturn in PRC but it will be felt more in Hong Kong, Taiwan, North Korea and such. These areas will have more impact compared to the people of PRC on the leadership of PRC. Since the gun and military of PRC is not able to impact that much in those areas.

Also these Arab Springs happening all over the world you dont hear and see such things in PRC and the world is fertile for such recently.

The basis of China's prosperity post 2008 financial crisis is the rapid expansion of M2 being lent out by the banks to buy worthless property and excess productive capacity. CCP has not allowed a crash because it would unravel the entire economy so they prop it up by cooking the books and rolling over bad debt to make the people think a crash is impossible. The size of debt now has become too big for CCP to control so they are trying to manage the defaults so not to spark panic. It only takes one spark to end that myth.

 

[Ray]

how abt merging tis harbinger with <doom and gloom of China> thread for consistency sake? will the collapse impact French economy in view of recent sale of Peugeot Citreon stake to Dongfeng for bailout among other deals like with Airbus?

Sent from my 5910 using Tapatalk 2

Let us discuss China.

Start a thread on the French Collapse and we can discuss that there.

 

[Ray]

It maybe correct that China's economy has seen a downturn, but I would be surprised if that means its is the collapse of China.

Being a totalitarian country, I am sure they will tweak it somehow so that China reamains on even keel, even if it does not appear to soar any more.

 

[mattster]

Sometimes I feel like an idiot when reading about finance.....excuse my ignorance, I'm an engineer. I had to look up what M2 money supply was.

Maybe this is a dumb question: but if you are sitting on a $Trillion dollar surplus like China is - then whats the big deal if a whole bunch of banks fail because of a bad loan portfolio precipitated by a property market crash ?

Why can't the Chinese government do exactly what the US did - Bail out a couple of the biggest banks that are "too big to fail", and let the smaller ones go under.

Am i oversimplifying this equation ?

 

[Armand2REP]

It maybe correct that China's economy has seen a downturn, but I would be surprised if that means its is the collapse of China.

Being a totalitarian country, I am sure they will tweak it somehow so that China reamains on even keel, even if it does not appear to soar any more.

There is no tweak big enough for this, they are just pushing a cart to the end of a cliff. How slow or fast they get there is of little consequence.

 

[DBF1954]

And even if banks fail it doesn't mean the economy or the country will collapse People writing such claims should just look back to 2008 and see how say the US or UK managed to save several big banks. Neither the economy nor the country did collapse.

China with its huge financial reserves and having a currency that isn't traded elsewhere can do much more to avoid even a single bank collapse. Speculators cannot attack the Chinese currency like they can the dollar.

I remember reading articles as far back as the early 1980's claiming that China would collapse very soon. Were are the people that wrote that now: Death and buried.

 

[Compersion]

The basis of China's prosperity post 2008 financial crisis is the rapid expansion of M2 being lent out by the banks to buy worthless property and excess productive capacity. CCP has not allowed a crash because it would unravel the entire economy so they prop it up by cooking the books and rolling over bad debt to make the people think a crash is impossible. The size of debt now has become too big for CCP to control so they are trying to manage the defaults so not to spark panic. It only takes one spark to end that myth.

The premise to the above is that PRC economy is comparable to other world economies and PRC M2 is a figure that is of value. But the fact is that it is not. It is a quality issue. For one thing the money supply is not monitored and also the currency is not free float. With this who knows PRC can even print money as much as they want and push it through their system without any checks and what difference would that make especially with such large scale. Look at how concentrated the PRC economy is with state enterprises. The most important is that PRC pays its people and they see income coming into their accounts (if not welfare) each month but where is that money coming from think about that. Also can that be described to be currency. (think about the germans before world war 2 and the development they had with all the huge debt). Accounting is not a practice followed in true measure and true spirit in PRC.

If the currency is not monitored they can continue the above frankly because there is no checks and balance. You mention loans think about money that comes out of no where. When you talk about Enron the PRC is Enron * [x]. Further the ability and focus on PRC is to hang-on and categorize the measures it takes and put on a show that it is like the other world economies. When people point out defects they quietly go and fix them. The premise of PRC is to be one-step ahead. It is like roll-over of debt over and over and over and over and over again. And if PRC reduces its interest rates to near zero think of that to be deduction for the same.

The downturn of PRC economy will be felt more by others and not its own people. The important words you use is "PRC has not allowed a crash". Also PRC has had many sparks in its history and much much worse. Do not discount the will of the PRC leadership to hang-on to power at all costs.

Many will mention that there is USD reserves and these were built up along with how the PRC economy was financed. But the problem with collateral is that who is using it for collateral is unknown - is it the USA - is it PRC - is it Hong Kong - is it Taiwan - is it Private. Further frankly the USA is comfortable with PRC making its goods in PRC the last time anyone has check but who knows in the future. As long as PRC is trading and is allowed to trade overseas with the major economies there will be casual continuation of the current ways.

In the long-term the PRC leaders want the economy to be like other world economies and they know there is a lot of dirt to fix. They will do that slowly: for example one mentions bad enterprises and debt - they will slowly take way such things in a manageable way. They will make it more difficult for people to get large amount of money in the hope that there is less defaulters and bad enterprises and more efficiency and everyone will not ask about past. They will show to the world they have [y] bad enterprises and debt - when in fact it is [z]. The [y] bad enterprises and debt will be manageable and in areas where it does not cause harm. It is a controlled approach. When default and bad enterprises occur in PRC what happens - its not like in USA and Europe. Non-performance is not transparent in PRC. As long as the people of PRC see money and welfare coming into the bank account (and not the source) what does it matter.

You go to Taiwan, Hong Kong, North Korea and the trading partners of PRC the companies and figures are wild but explainable. But if you go inside PRC thats where the circus is but no one is allowed to do that. But that does not matter since the availability of PRC money is on tap and when that 1 profitable enterprise (out of [x]) the emerges from the ash the PRC leaders shift it overseas to show PRC development. But the ironic thing is that when these go overseas they do not always perform.

The PRC leaders (only) talk about the PRC that is outside and not inside since they are economically more transparent and are more viable since they have to be with accounting practices overseas. PRC is represented by its economic indicators outside PRC and that's why Taiwan, Hong Kong, North Korea and the trading partners of PRC will be able to put more pressure on the PRC leadership compared to the people of PRC. For example if the PRC companies overseas fail especially the one on the public stock exchanges - what would happen (refer to the history of the local enterprises). For example legal issues overseas. For example the trading partners realise that it is not viable to trade with PRC and the figures they are reporting and look at are lower and lower compared to before. For example companies start shifting aways from PRC.

The PRC also believe that "looking" at the infrastructure is a means for people to not take notice and pay heed to how the infrastructure was built and if that infrastructure is making any profit and that is in infact empty. It is a means to maintain control of its people to show to them it is rosy and believe in the leadership. One can label PRC a extremely inefficient manufacturing economy but that does not label its end. If no-one made anything in PRC tomorrow they still would survive - it was like that before 1990s.

There is a reason why it is still a Communist country. But there is a reason why the world keeps asking the same question - when PRC collapse will happen. Why is that question asked over and over again.

 

[Armand2REP]

The signs are adding up...

Over 70 Chinese state-run firms sell stakes in real estate

Chinese state-run enterprises in the fields of petrochemical refining and power generation have put their shares in property development companies on sale over the past month at relatively low prices. The move has left many questioning whether it was an effort to protect themselves from Beijing's anti-corruption crackdown, or whether it was taken in anticipation of a gloomy future for the property market, the Beijing-based Economic Observer reports.

The enterprises include the China Petroleum and Chemical Corp, China National Chemical Corp, and China Resources Gas Group in the petrochemical sector, and the State Grid Corp of China, China Guodian Corp, China Huadian Corp, Power Construction Corp of China and Guangxi Water and Electric Power Construction Group in the electricity generation sector.

Figures from assets and equity exchanges in Beijing, Shanghai, Tianjin and Chongqing reflected that as of March 27, more than 75 state-operated real estate companies had their equities or assets traded at various exchanges. The total market value of the sold equities and assets exceeded 10 billion yuan (US$1.6 billion), according to the Economic Observer.

 

[Armand2REP]

China's new mini-stimulus offers signs of worry about progress

China has just announced more government spending to boost the economy.

If growth was on course to hit its target of 7.5% this year, then China wouldn't be undertaking borrowing to spend.

Although the last fiscal stimulus lasted for years, bolstered by small measures since, this is perhaps the first time that the State Council has announced new stimulus measures - since the 2008 global financial crisis - that rely predominantly on bond markets for financing.

It seems that the Chinese government is worried enough to undertake a new mini-stimulus, as the sums to be spent are not large but should bump up GDP growth if successful.

Railway projects
Some of the government spending is just pushing forward infrastructure projects - rail, social housing - that had been planned.

But, the acceleration itself is a sign of worry. It's what China did in 2009 when it injected fresh stimulus to support the economy alongside planned spending on roads and railways.

At the time it was criticised for not spending enough on social welfare that could boost consumption, but investment is the easier way towards growth for China.

The fiscal stimulus measures are being financed by the central and not local governments, and via bond markets rather than bank lending"

As a result, an excessive reliance on credit was another worrying legacy from the last stimulus, one that has now raised risks in the economy.

But, this time, there's progress. Unlike the way the last stimulus was financed, the central government is issuing bonds to finance the spending.

The reliance on local governments to finance most of the 2009 fiscal stimulus was one of the causes of the growth in borrowing, as localities can't issue bonds independently. So all of that sizeable spending ended up being financed by bank loans from state-owned banks.

The rapid growth in debt since then is a real cause of concern for the Chinese economy, as debt is estimated to be 200% of GDP.

So, this time, the central government is borrowing from the bond market, which is more the way market economies would do it.

China will issue 150bn yuan of bonds ($24bn; £14.4bn) this year to finance railways in the less-developed central and western regions.

China also announced a new 200-300bn yuan fund ($32-48bn) to finance the 6,600 kilometres (4,101 miles) of new railways this year, the bulk of which will also be in the lesser-developed interior.

It will also invest more than 1 trillion yuan ($161bn) in social housing, redeveloping shanty towns.

It looks like that will be financed by bonds issued by the China Development Bank, a development bank that essentially operates as an arm of the state.

Targets must be hit
So, the Chinese government will again issue bonds rather than rely on bank lending.

There will also be some preferential tax treatment for small and medium-sized firms.

That is also how fiscal policy operates, rather than what China has done before - which is to direct credit to support state-owned enterprises, for instance, when it wanted to boost industrial output.

So, this new mini-stimulus is pushing output forward to help China meet its growth target this year.

Many countries wouldn't worry about coming in below an impressive 7.5% growth rate. But, for Chinese officials, targets are not to be missed.

It's certainly a sign that they are worried. But, the fiscal stimulus measures are being financed by the central and not local governments, and via bond markets rather than bank lending.

BBC News - China's new mini-stimulus offers signs of worry and progress

Ouch, more stimulus required!

 

[Broccoli]

Show me a country where stimulus is not required? I fail to see how that leads "collapse".

 

[W.G.Ewald]

JOGS are the smallest scale maps (1:250,000,000) I have used.

Joint Operations Graphic (JOG) 1:250,000 | Topographic Maps | Series | Products | East View Geospatial

Look at the series map at the link. It seems that most navigation is done at mid-latitudes where projection distortion is minimal.

Perhaps at higher latitudes avionics or GPS compensates for map distortion.

 

[Armand2REP]

The price crash is coming........

Surplus housing in China reaches five-year high｜Markets｜Business｜WantChinaTimes.com

Inventory of unsold houses in China's first and second-tier cities have reached the highest level in the past five years. The land area of properties sold in the country in the first quarter of the year has also plunged at least 20% from last year, reports our Chinese-language sister paper Want Daily.

Twelve major cities including Beijing and Shanghai saw a total of 27.72 million square meters of properties sold in the first quarter. The figure was 8.21 million square meters, or 22.86%, lower than the same period last year, according to Chinese financial news website Great Wisdom.

Beijing has reported a 55% drop in the area of properties sold while the figures in Shenzhen and Hangzhou both decreased more than 30%. Shanghai, Chongqing and Nanjing also saw drops of over 20%.

China sells rare earth for absurdly low prices｜Markets｜Business｜WantChinaTimes.com

China provides more than 90% of the world's rare earth materials, but without price fixing rights, it has to sell them for rock bottom prices, the Shanghai-based China Business News reports.

"One yuan worth of rare earth elements, after rough processing, can be sold at around 10 yuan (US$1.60) to 20 yuan (US$3.25) at most, but once they are sold to Europe and the United States for deep processing, we need to spend 1,000 yuan (US$160) to buy them back," said Wang Jionghui, assistant president of China Minmetals Corporation.

RMB depreciation unlikely to boost China exports

Yiwu in eastern China's Zhejiang province, a city renowned for its small commodity trade and vibrant free market trading style, could serve as a barometer for judging the ties between the yuan's value and exports. A city official told the paper that the situation will not help the city's export business, however.

Exporters from Yiwu have yet to enjoy any benefits stemming from a falling yuan, the official said, as many foreign buyers tend to demand that Chinese exporters quote preferential prices for their products to reflect the currency value.

In another words, foreign buyers are using a weakened yuan to demand discounts. Exporters in Yiwu, who are largely engaged in the trading of low-end products, such as fashion accessories, toys and gifts, are already suffering because of their weak pricing power, and they have found that their pricing strength has weakened further.

Meanwhile, the yuan has risen considerably ahead of the latest depreciation to make China-made goods more expensive. Rising labor costs in China has also resulted in many foreign buyers scaling back orders, and turning to Southeast Asian countries instead.

A weaker yuan has failed to benefit Chinese exporters, and even worse, had given rise to fears that volatility in the currency would hurt their bottom lines, according to the paper.

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20140406000045&cid=1203

 

[Armand2REP]

Desperate for credit, China importers default on soy cargoes

By Naveen Thukral and Niu Shuping

SINGAPORE/BEIJING (Reuters) - Chinese importers have defaulted on at least 500,000 tons of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as buyers struggle to get credit amid losses in processing beans.

Three companies in the eastern province of Shandong had defaulted on payments for shipments as they were unable to open letters of credit with banks, trade sources said on Thursday.

A string of defaults on loans, bonds and shadow banking products in recent weeks has highlighted rising credit risks in China, partly fuelled by signs the economy is slowing.

Commodity firms, along with semiconductor and software companies, are among the most at risk of credit defaults, a Reuters analysis of more than 2,600 Chinese companies showed.

Up against the cooling economy and signs that authorities will not step in every time a loan goes bad, Chinese banks are becoming more hard-nosed and selective about whom they lend to.

"There are five to six (panamax) cargoes which are unable to be unloaded at ports because buyers cannot open LCs (letters of credit) and there are no LCs for an additional 5-6 cargoes floating on the sea," one Beijing-based source said. Each panamax cargo is for 50,000 to 60,000 tonnes.

 

[amoy]

Can China Become a High-Income Economy? | The Diplomat

Already it has moved up in the World Bank's statistical estimation: into the upper-middle income bracket (those economies with a 2012 GNI of $4,086-$12,615 per capita) in the same territory as Brazil, South Africa and Turkey. However, whereas these nations are ostensibly stuck in the middle-income trap, without the capital, technology, or labour conditions to converge further, China is tipped to move into the exclusive high-income club of nations (those with a 2012 GNI of $12,616 per capita). In a recent working paper, the IMF has appraised the dragon economy's prospects of achieving fully developed status as being entirely within its grasp—albeit with a number of important caveats.

by HSBC

 

[cir]

India will find a place in the map above if it does not get a move on soon。

 

[cir]

Guangdong's 2013 GDP is 1020 billion USD，the 1st trillion dollar province for China。

 

[jon88]

India will find a place in the map above if it does not get a move on soon。

India like to dwell and bicker about the past and get into the blame game, while China just move forward.

 

[jon88]

The premise to the above is that PRC economy is comparable to other world economies and PRC M2 is a figure that is of value. But the fact is that it is not. It is a quality issue. For one thing the money supply is not monitored and also the currency is not free float. With this who knows PRC can even print money as much as they want and push it through their system without any checks and what difference would that make especially with such large scale. Look at how concentrated the PRC economy is with state enterprises. The most important is that PRC pays its people and they see income coming into their accounts (if not welfare) each month but where is that money coming from think about that. Also can that be described to be currency. (think about the germans before world war 2 and the development they had with all the huge debt). Accounting is not a practice followed in true measure and true spirit in PRC.

If the currency is not monitored they can continue the above frankly because there is no checks and balance. You mention loans think about money that comes out of no where. When you talk about Enron the PRC is Enron * [x]. Further the ability and focus on PRC is to hang-on and categorize the measures it takes and put on a show that it is like the other world economies. When people point out defects they quietly go and fix them. The premise of PRC is to be one-step ahead. It is like roll-over of debt over and over and over and over and over again. And if PRC reduces its interest rates to near zero think of that to be deduction for the same.

The downturn of PRC economy will be felt more by others and not its own people. The important words you use is "PRC has not allowed a crash". Also PRC has had many sparks in its history and much much worse. Do not discount the will of the PRC leadership to hang-on to power at all costs.

Many will mention that there is USD reserves and these were built up along with how the PRC economy was financed. But the problem with collateral is that who is using it for collateral is unknown - is it the USA - is it PRC - is it Hong Kong - is it Taiwan - is it Private. Further frankly the USA is comfortable with PRC making its goods in PRC the last time anyone has check but who knows in the future. As long as PRC is trading and is allowed to trade overseas with the major economies there will be casual continuation of the current ways.

In the long-term the PRC leaders want the economy to be like other world economies and they know there is a lot of dirt to fix. They will do that slowly: for example one mentions bad enterprises and debt - they will slowly take way such things in a manageable way. They will make it more difficult for people to get large amount of money in the hope that there is less defaulters and bad enterprises and more efficiency and everyone will not ask about past. They will show to the world they have [y] bad enterprises and debt - when in fact it is [z]. The [y] bad enterprises and debt will be manageable and in areas where it does not cause harm. It is a controlled approach. When default and bad enterprises occur in PRC what happens - its not like in USA and Europe. Non-performance is not transparent in PRC. As long as the people of PRC see money and welfare coming into the bank account (and not the source) what does it matter.

You go to Taiwan, Hong Kong, North Korea and the trading partners of PRC the companies and figures are wild but explainable. But if you go inside PRC thats where the circus is but no one is allowed to do that. But that does not matter since the availability of PRC money is on tap and when that 1 profitable enterprise (out of [x]) the emerges from the ash the PRC leaders shift it overseas to show PRC development. But the ironic thing is that when these go overseas they do not always perform.

The PRC leaders (only) talk about the PRC that is outside and not inside since they are economically more transparent and are more viable since they have to be with accounting practices overseas. PRC is represented by its economic indicators outside PRC and that's why Taiwan, Hong Kong, North Korea and the trading partners of PRC will be able to put more pressure on the PRC leadership compared to the people of PRC. For example if the PRC companies overseas fail especially the one on the public stock exchanges - what would happen (refer to the history of the local enterprises). For example legal issues overseas. For example the trading partners realise that it is not viable to trade with PRC and the figures they are reporting and look at are lower and lower compared to before. For example companies start shifting aways from PRC.

The PRC also believe that "looking" at the infrastructure is a means for people to not take notice and pay heed to how the infrastructure was built and if that infrastructure is making any profit and that is in infact empty. It is a means to maintain control of its people to show to them it is rosy and believe in the leadership. One can label PRC a extremely inefficient manufacturing economy but that does not label its end. If no-one made anything in PRC tomorrow they still would survive - it was like that before 1990s.

There is a reason why it is still a Communist country. But there is a reason why the world keeps asking the same question - when PRC collapse will happen. Why is that question asked over and over again.

We ask it again and again because China uses a system that is totally alien to us .We , at the democratic world think that we are "perfect". The fact is we are blind to our faults just as the Communist are blind to theirs. We feel good and elated when we gave our people the chance to vote but felt nothing when they die from starvation and poverty. The Communists see no point in democracy when it's people have empty stomachs. Whats the point of arguing about how the elite few in Communist nations grow richer and more powerful when the same thing happens to democratic societies. The poor and weak are still being marginalised just the same on both systems.

It's funny how you suggest that the Chinese use a currency that is unaccountable while ignoring the fact that the world currency, the US dollar, is based on thin air and basically an IOU note. As far as any monetary traders are concerned, the Chinese Yuan have a much more solid security foundation than the US dollar which is in fact almost totally uncollateralled by any security reserve.

 

[cw2005]

There are two major models for developing countries. One is to develop the economy and education of citizen followed by giving people's freedom and/or democracy. Another is to apply democracy firstly followed by developing the economy and education of citizen. Obviously China takes the former and India takes the other. We have witnessed relaxation on people's freedom in China and economy development in India. It is too early to conclude which one is better. However, there were successful stories in countries such as Korea, Taiwan, Singapore and even to certain extent, Hong Kong.

 

[jon88]

There are two major models for developing countries. One is to develop the economy and education of citizen followed by giving people's freedom and/or democracy. Another is to apply democracy firstly followed by developing the economy and education of citizen. Obviously China takes the former and India takes the other. We have witnessed relaxation on people's freedom in China and economy development in India. It is too early to conclude which one is better. However, there were successful stories in countries such as Korea, Taiwan, Singapore and even to certain extent, Hong Kong.

I know that Korea, Taiwan, Singapore, HongKong and even earlier Japan use the economy and education first approach model. China is following that approach. Any examples of success stories of emerging countries using the other model (democracy first) so far?

I think the economy-education first approach suits East Asian culture. Applying in African, Arabic, and Latino cultures have proven to be somewhat mixed.