The Collapse of China May Be Near

Discussion in 'China' started by Armand2REP, Apr 2, 2014.

  1. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Over the last three weeks China has seen a deluge of companies defaulting on bonds. Property prices are collapsing all over the country with CCP officials dumping property for pennies on the dollar. Chinese banks have written off $9.8 billion in NPLs off their balance sheets in the last month and it looks set to explode as property prices fall (property is the key collateral for Chinese bank loans). Many of China's key industries are in serious trouble from shipbuilding, mining, heavy equipment to steel and construction. PBOC has only bailed out SOEs to date so China's private sector is in serious trouble. Ronsheng is the first major company set to default, keep an eye out as if it doesn't get bailed out, no one is safe.
     
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  3. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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  4. Compersion

    Compersion Senior Member Senior Member

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    I always thought if PRC reduced its interest rates to near zero like japan, usa what would happen.

    I am under the impression that the collapse of PRC will not be because of economic but more because of failed leadership and if not peoples will. prc has been playing and fudging with its economic variables for far too long and also has far too much control on such. also the amount of mistakes and ridicule that prc has overcome makes the current news to be minimal in its impact.

    The people do not seem to have the will and frankly fear the state (and the gun) and further the leadership does not face any impediment and internal battle at the present time. If the poor economy of PRC increases the will of its people to request for change that is understandable.

    But I am not sure if any collapse happens because of economy suddenly. But who knows what future holds for PRC - good luck to people there.
     
  5. amoy

    amoy Senior Member Senior Member

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    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
     
  6. Srinivas_K

    Srinivas_K Senior Member Senior Member

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    The Solar company Chaori is of 160 Billion and two steel giants of combined worth close to 240 Billion have defaulted last month.,

    The Defaults are still continuing at the local level.

    This is bound to happen when China chose to invest in infrastructure in 2008 to continue the economic booms.

    In 2008 when the Western economies are in slump, Chinese economy which is recording more than 10 % GDP growth because of manufacturing has to slow down because there is steep decline in exports.

    CCP instead choose to induce capital into Chinese economy and stimulated it, there by altering the GDP growth from Manufacturing based one to Infrastructure based GDP growth.

    In the past 5 years Chinese officials set some aggressive targets and built infrastructure in a large scale. The problem is these infrastructure has not returned considerably and so the bubble in economy increased as the cycle continued with Shadow Banking and state funded Banking.

    During the past 5 years Chinese bankers induced capital into infrastructure aggressively at smaller interest rates. For the officials at local level building more infra means increasing the GDP stats, even though this method of calculation is a flawed one.

    There are many problems associated with infra and housing projects that are executed in China, Majority of people cannot afford these flats and it is estimated that 15% of the newly built flats are owned by the rich. By the time Chinese people can afford these flats .i.e by the end of this decade(estimates but I highly doubt, since Chinese per capita is manipulated one) Chinese will become old.

    Now at this moment CCP has no option but to control the liquidity and steady the economy. Reason why many are predicting 2014 is a tough year and in the coming two or three years there will be a crisis in China.(China at the moment is where the west is in 2006 .i.e 2 years from economic depression).

    China has 3.5 Trillion dollars in reserve and most of Chinese save 1/3 of their income earned so China can face the crisis, but the growth rates it has achieved in the last decade is not possible.

    The latest policy of CCP is aimed at urbanization of 100 million residents. They are concentrating on Domestic growth and consumption, this also includes services sector.

    But Chinese are becoming older and because of one child policy China is loosing its cheap labor edge, if the urbanization is continued China will become a good market for West, India and ASEAN nations since Chinese will have good percapita income and they need to consume.

    India should improve the economy in a more balanced way so that growth rates will be sustained for a long term than China.



     
  7. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    The fall of CCP will be at the hands of mass unemployment and a banking crisis would trigger that.
     
  8. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    The Chinese labour market has already retracted 2% over the last 5 years due to aging. They are getting grey and bankrupt before they get rich. The most talked about debt fear is bankrupt property but Chinese corporate debt has grown greater than the US since 2008 which is a very short time. Debts are coming due and companies are allowed to default. Only minor bailouts have been seen so far...
     
  9. Compersion

    Compersion Senior Member Senior Member

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    The PRC has been at the hands of worse and why would mass unemployment be a worry to its leadership since they control the gun and military and has no inhibition to use it to maintain control. Do you realize the inference from that. The PRC leadership one can say is cocky enough to feel that there wont be any change by its people since they have made them fear them too much.

    Sure the mass unemployment might increase the will of its people but they are clueless on how to express that will and what would they request for. They will request for better economy and the PRC leaders have been trying to do that to be honest.

    There is more chance that other nearby regions will face change because of economic issues and from that it would stream into PRC. Hong Kong, Taiwan, even North Korea.

    The above news once can say has been known and understood for long that PRC economy is not developed on good foundation. But what looks good to the eyes one does not always get a chance to look underneath the dress ... someone needs to have the strength to lift that dress and that is more likely to be Hong Kong, Taiwan, even North Korea - since they do not fear the military and gun comparably.

    http://www.cnbc.com/id/101359418

    Lloyd Blankfein: 'This could be China's century'

    (but like you have said there is a lot of parameters)
     
    Last edited: Apr 2, 2014
  10. Srinivas_K

    Srinivas_K Senior Member Senior Member

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    Defaults are very rare in China, But now they are allowing it.

    Crisis in the sense the chinese economy will slow down, But the savings of Chinese and currency reserves of China will mitigate the effect to some extent.

    Last month close to half a trillion dollars worth of companies have defaulted in China.

    There are some real estate companies and companies related to public bonds are expected to default as well.
     
  11. Srinivas_K

    Srinivas_K Senior Member Senior Member

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    The stress on the economy will make CCP be implement some liberal political reforms, this is the main change that is going to happen in China in the next decade.

    If CCP is stubborn regarding political reforms then china will be in trouble.

    There are some predictions regarding the political and economic changes in China. But at the moment chinese CCP is allowing economic reforms completely ignoring political reforms.

    These transition periods are dangerous since rivals like West may use this opportunity to destabilize China.
     
  12. cw2005

    cw2005 Regular Member

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    The economy slowdown is almost sure to come or has already come. After so many years of fast development at the rate of 8% or more per year, China has reached the peak and going nowhere but down. It would be better to suffer a lengthy manageable pain rather than a sudden death. China's leaders have the wisdom to allow default of those companies that no longer worth to survive is better to spend public money to keep them going. There would be more adjustment to come.
     
  13. bose

    bose Senior Member Senior Member

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    The main issue with China is that their economy is based primarily on exports rather than the consumptions within the country... To sustain a 8% growth with falling exports and rising labor costs will not going to sustain a high growth rate... so the economy is bound to take the hit... it will worsen with more competitiveness from countries like Philippines, Vietnam etc…

    China without a high growth and ageing population, its dream of catching up USA looks to hit a road blocks…
     
  14. PredictablyMalicious

    PredictablyMalicious Punjabi Senior Member

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    Inshalllah
     
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  15. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    CCP has been growing M2 money supply 25% since 2008, that is how they maintain manufactured employment and they simply can't afford that much debt anymore. It will come undone. You act like CCP can massacre thousands and survive, those days are long over with social media.
     
  16. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    What economic reforms has China TRULY implemented? The economy is still propped up on negative return investment and artificial housing prices while the Chinese depositor is hosed by negative saving rates. Chinese debt is backed by property worth half its listing price, when that cap falls the Big 4 banks will implode, the 10k regional banks and 30k cooperatives will be gone long before that. The amount of damage to the economy it would take to reform the economy is too much for CCP to survive... not to say a democratic China couldn't do it with a whole bunch of pain.
     
  17. jus

    jus Senior Member Senior Member

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    Some where i read
    India is Boiling water Boil in top calm inside...
    China is Boiling Oil its look calm on top boil inside...
    Just one incident make CHINA into Chaos.....
    Communism is time tested WORST king of FAILED Idea
     
  18. mattster

    mattster Respected Member Senior Member

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    I am not sure I buy this property bubble theory....sure there is a property bubble, but which major city in the world doesn't have a property bubble.
     
  19. Compersion

    Compersion Senior Member Senior Member

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    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.
     
  20. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

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    Now even the chinese private sector companies will want NaMo to be the next Prime Minister
     
  21. badguy2000

    badguy2000 Respected Member Senior Member

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    hi, my old friend,MR. armand, long time no see...
    how warmhearted you are to worry about CHinese economy while economy crisis has impacted on Eruope soo much in the past several year!

    I am fine here in CHina.
    I got married in 2011. Now I have a son..
    my salay has doubled in the past 2 years too..
    I bought two houses and one small shop after 2008. because the price of real asset here also has doubled in the past 4 years,my investment on the houses and shops got considerable appreication.


    how are you? I heard that economy crsis influences Erope very much...
    has your salary shrinked since economy crsis broke out in Europe? does economy crisis impace on frenchmen like you?

    BTW, I am not going to buy a 3rd house in CHina now,because CCP government forbid banks here lending loans to the 3rd house buyer like me.
    So maybe I am going to buy some a second small shops here for investment.
    Or if I am allowed to borrow some loans from France banks , I maybe will buy the 3rd house in france..If possible, I hope that I can meet you there....

    yours faithful
    Badguy..from Ganzhou,CHina.
    ?
     
    Last edited: Apr 2, 2014
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