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China's epic hangover begins

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posted on Dec, 14 2011 @ 05:34 PM
UK Telegraph

China's credit bubble has finally popped. The property market is swinging wildly from boom to bust, the cautionary exhibit of a BRIC's dream that is at last coming down to earth with a thud.

It is hard to obtain good data in China,but something is wrong when the country's Homelink property website can report that new home prices in Beijing fell 35pc in November from the month before. If this is remotely true, the calibrated soft-landing intended by Chinese authorities has gone badly wrong and risks spinning out of control.

The growth of the M2 money supply slumped to 12.7pc in November, the lowest in 10 years. New lending fell 5pc on a month-to-month basis. The central bank has begun to reverse its tightening policy as inflation subsides, cutting the reserve requirement for lenders for the first time since 2008 to ease liquidity strains.

The question is whether the People's Bank can do any better than the US Federal Reserve or Bank of Japan at deflating a credit bubble.

Chinese stocks are flashing warning signs. The Shanghai index has fallen 30pc since May. It is off 60pc from its peak in 2008, almost as much in real terms as Wall Street from 1929 to 1933.

"Investors are massively underestimating the risk of a hard-landing in China, and indeed other BRICS (Brazil, Russia, India, China)... a 'Bloody Ridiculous Investment Concept' in my view," said Albert Edwards at Societe Generale.

"The BRICs are falling like bricks and the crises are home-blown, caused by their own boom-bust credit cycles. Industrial production is already falling in India, and Brazil will soon follow."

"There is so much spare capacity that they will start dumping goods, risking a deflation shock for the rest of the world. It no surpise that China has just imposed tariffs on imports of GM cars. I think it is highly likely that China will devalue the yuan next year, risking a trade war," he said.

China's $3.2 trillion foreign reserves have been falling for three months despite the trade surplus. Hot money is flowing out of the country. "One-way capital inflow or one-way bets on a yuan rise have become history. Our foreign reserves are basically falling every day," said Li Yang, a former central bank rate-setter.

Cited only in part, there is so much interesting information here that could almost emphasise all of it. Imagine what happens when the illusion of China being the savior of the global economy comes hitting back to earth in reality? I've seen many of the issues outlined here in the news recently so its not all that new, but taken together presents a dire picture of the Chinese problem. A fitting conclusion to the article:

In truth, China faces an epic deleveraging hangover, like the rest of us.

posted on Dec, 14 2011 @ 05:43 PM
reply to post by surrealist

S & F

I've been reading along over the past year or two and have come across some rather interesting articles. Take them with a grain of salt as usual...

Chinese TV Host Says Regime Nearly Bankrupt

China’s economy has a reputation for being strong and prosperous, but according to a well-known Chinese television personality the country’s Gross Domestic Product is going in reverse.

Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. He coined the phrase: “In China, every province is a Greece.”

The restrictions Lang placed on the Oct. 22 speech in Shenyang City, in northern China’s Liaoning Province, included no audio or video recording, and no media. He can be heard saying that people should not post his speech online, or “everyone will look bad,” in the audio that is now on Youtube.

posted on Dec, 14 2011 @ 05:44 PM
so who controls financial system. if it's not countries then who. you can't blame banks they almost got liquified and bailed out by the world governments.

now countries in strong financial shape are getting hit.

the system is broken and needs fixing.

you can't base a system off greed. a sin.

it's like trying a new 4 way stop light design of all green lights.

posted on Dec, 14 2011 @ 05:48 PM
I saw this article just a while ago: China's Hu Reportedly Tells Navy to Get Ready for Military Combat

I'm not saying it's related in any way, BUT, you know what they say....war is good for the economy...

posted on Dec, 14 2011 @ 05:49 PM
You would be surprised at how many Chinese want to leave China. With it comes the money they made.

According to a new study, almost 60% of China’s “high net worth individuals,” defined as those possessing more than 10 million yuan in investable assets, are either considering emigration through investment programs or are completing the emigration process.The survey, conducted by China Merchants Bank and Bain & Co., also reports that 27% of those with more than 100 million yuan in investable assets have already emigrated and 47% of them are thinking about leaving the Motherland.

Chinese Entrepreneurs Are Leaving China
edit on 14-12-2011 by sonnny1 because: (no reason given)

posted on Dec, 14 2011 @ 05:51 PM
So much for China being the growth miracle of the world blah blah blah blah.

You can't roll Western in an Eastern culture. It just doesn't make sense.

posted on Dec, 14 2011 @ 06:02 PM
So what will happen next when the whole world starts crashing down to pieces? What will come out from the ashes?

posted on Dec, 14 2011 @ 06:05 PM
Here is another supposed ticking time bomb...

China Real Estate The Mother of All Bubbles (Chart)

Take a gander at home prices in China. Since the 2008 financial crisis, the Chinese housing market has skyrocketed 60%. There are now 65 million vacant housing units. The question is no longer whether there is a Chinese housing bubble, but when will it pop. There is one thing that bubbles ALWAYS do. An that is POP!!!

posted on Dec, 14 2011 @ 09:24 PM
reply to post by surrealist

This is information that could lead to the final unraveling of the entire global economy.. I'm talking a World wide economic collapse of biblical proportions. It will result in having to double our own monetization efforts leading to a huge spike in inflation .. but worst of all it will destabilize Europe to the point it's unlikely to recover.

posted on Dec, 14 2011 @ 11:53 PM
Good responses.
Another development in China is civil unrest breaking out here and there. This is about government selling land of which the Chinese are protesting against:

R evolt in China: After Protests, a Village Gets Blockaded by Local Authorities

In the southeastern Chinese province of Guangdong, a village is under revolt. Residents of Wukan, population 20,000, have been protesting the sale of their lands by local officials for months. The dispute escalated after the local government announced that Xue Jinbo, a villager who had been detained last week on suspicion of participating in a September protest, died in police custody. The authorities said the 43-year-old had died of a heart ailment, but his family and Wukan residents suspect that Xue, who was chosen by villagers a representative in talks with the government, was beaten to death. The public anger has turned the Wukan protests into a full-scale revolt, and created a serious problem for Communist Party officials at a time when other forms of unrest, including labor disputes, are rising and economic growth is slowing. Wukan now appears to be under siege.

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