China Economy Concern

[errolanderson]

Hi all . . . this is my 1st time
posting,but my reason is our concern
about the downturn in China's economy.
China's banking system appears at risk
due to bad loans and in some cases . . .
fraud. Also, there are signs that
China's credit bubble may have burst
exposing their banks at huge risk.
Beijing new home prices have tumbled
about 35% in the past 2 months.

Should China's economy tip over, Western
Canada would be directly impacted. Real
estate would start to decline here,
possibly even including land prices. I
know this is a touchy subject to
address, but I'm indeed concerned about
developments in the world's largest
buyer of raw materials.

Also, credit downgrades in Europe are
not a good sign. This will likely
pressure the loonie further, that's the
good news. But equity markets may come
under pressure soon.

Thought this was worth sending out

Errol

[parsley]

Good to have you join AV'ers, errolanderson. It's
such an economically volatile time, it's unsettling,
isn't it. Each country is borrowing money from
other countries who have no money, either.

The audacity of the dead-broke to assume they
have the ability to manage other dead-brokes'
financial and banking systems, is at first, a
humorous thought to leave with you this morning.
And then, not funny at all. Pars

[bduke]

Hi Errol... My understanding of the China slowdown is that the central planners reduced
bank leverage to contain inflation, and their manufacturing sector is having reduced
export demand for their products.

So China 's growth may be down to 6% to 7% this year, from around 10% the past few
years.

These numbers compounded, and are compounding, to a much larger economy very
quickly, and have greatly increased its domestic consumption.

This "slow growth' is expected to match the US economy by the early 2020's.

A mortgage problem in China is also highly unlikely because of a 60% down payment
requirement for home owners... so I am told.

The possibility of large apartment investments being underwater is possible, but it is
expected the government will supplant the private investors if needed.

The requirement for urban housing has ebbs and flows but is still predicted to have
tremendous growth over the next few years, so these apartments are expected to be
filled.

So my take on this "China slowdown" is that it is a slowdown relevant to the recent
tremendous growth.

If any developed country was at 6% growth, with over a billion people, what headlines
would we expect?

BTW GM and Ford auto sales increase an average of 7.5 %... an additional 3 million
vehicles.. in the last slower quarter.

This is down from previous quarters so it is obviously shocking.

I think 6% growth from a rapidly growing baseline is only a pipe dream for most of the
countries worrying about China.

I could be wrong.

Cheers... Bill

[bduke]

To clarify auto sales... total sales were over 3 million
for GM and Ford in China in last quarter.

Growth is still increasing.

BTW Chinese buy more new autos per month than
Canadians do per year.

Sorry for the mislead... Bill

[malta]

Thanks Errol. I have heard concerns of the Chinese economy. India is also facing some problems which have curtailed their imports. The western economies dodged a bullet in 2008 when the expanding economies bailed them out, but sadly all the western economies continued down their destructive path of high spending and ever increasing regulations. I see the asian economies slowing and no white knight on the horizon to stop the crunch from happening.

[TOM4CWB]

Errol,

Thanks for dropping by!

I heard a number of 'experts' expressing concern about China over the past few days.

One guy on BNN had a good point.

As Cotton's number guy made clear... at plus 7 percent per year... an economy doubles in size in 7 years. China was up to 12 percent, 4-5 years to double.

To expect China to slow down in growth... is reasonable. They cannot continue to grow exponentially. So now a 5 percent growth level is equal to 10 percent some years back.

China has also had a huge drop in its trade surplus... while on first glance this may appear bad... it means they are importing more... which is good for the rest of the world. The US is also importing more... and Canada is one of the gainers with a $1B surplus last month.

The one commentary ended up saying China might only grow 2 to 3 percent... fine for everyone else... but most would say a recession in China.

For a centrally planned economy... they are bound to have bubbles and problems... command and control systems assure us of this!

Cheers... good to have you with us!!!

[parsley]

Okay, I'll throw out a large, down the road
scenario:

G20's buy the toys. Cars. Ships. Barbie dolls.
1.3B Chinese manufacture a lot of toys. As does
Germany.

Spending continues as governments worldwide
meet to lunch and piss. EU owes much money to
Germany. Continued debt write down is taken for
granted.
Thrifty Germans finally get fed up with never
being war-forgiven, while paying spendthrifts' bills.
The "troika" (IMF, European Commission, &
European Central Bank), run out of per diem
dollars for their central planning sessions, when,
to their shock, German taxpayers elect a new
gov't based upon dumping the euro, re-instating
the German mark, and cranking up interest rates
on their indebted borrowers.

Interest rates soar. Some banks close. Money
dries up worldwide.

China's orders for manufactured goods slows to a
trickle, and their billion angry people get real edgy
as jobs fade. They demand the Americans pay
up fast, especially since US are again
manufacturing at home.

Wealth creators put head down, ass up, and work
double time and a half.

The entitled plan the unrest in their parents'
basements.

All right. Hit me with my stupid stick. Pars

[TOM4CWB]

Parsley,

Soverigns create currency... so don't expect that to run out.

This is all a part of conversion to a China. India, and SE asia economy to a consumer led economy. Strategists have been expecting this to happen all along.

It has been consistent since the start of the industrial revolution.

[parsley]

What is the contingency plan for unrest?

[TOM4CWB]

Parsley,

SPEND, Build, provide cheap food.

[Daylate]

So maybe we'll be protecting our bins with AK's instead of OPI's

[bduke]

Parsley.... Your comments regarding German taxpayers dislike for bailing Eurozone
wrecks are valid.

This is why Merkel is walking such a tightrope to not scuttle her re-election.

However, the effect of the reduced euro value from its many over indebted members is
very favourable to Germany's exports and economy.

In fact Germany is gaining control of Europe through its Euro membership which it didn't
gain through previous wars.

The likely hood of any Government reverting to the Deutsche mark is slim, when the
reality of governing with a greatly increasing currency value is laid out.

They would probably need to fix this mark like the Swiss recently have to stop the inflow
to their currency.

Were they not to fix it ,lower to negative interest rates are most likely.

More importantly, why would Germany reduce their influence over Europe which they
have sought for generations?

Regarding bank failures and interest rates, the vulnerability of banks is dependent upon
the quality of their loan portfolios.

Higher interest rates allow for better consumer spreads for personal banking.

Corporate banking would be more at risk because of sovereign defaults, and the
incidence of large corporate failures.

Tom has referenced the ability to increase money supplies. I think this tactic is more
likely if banks.. especially Eurozone banks... are at risk.

Unrest and demonstrations may be prevalent in the developed counties. I doubt such
disruptions and malfeasance would be tolerated in China.

BTW... China apparently is still executing about 80 people per day. Their government
tolerance is not comparable to ours.

Regarding unrest in more developed countries, I believe that bond values eventually rule
the day.

Changing governments are likely, but adjustments tend to be driven via the old "Hip
National" when the cheques don't cash.

I still think China will be an ever increasing force in the near future, and I don't believe
the Chinese powers believe an epidemic of disruptiveness is in their interest... including
their markets.

Nor do I believe that 6% growth is a recession.

Cheers... Bill

[parsley]

"Soverigns create currency... so don't expect that
to run out. "

Indeed, Tom. Print. Print. Print. But would your
Princess perhaps be a little annoyed if her fifty
dollar bill buys one loaf of bread? Pars

[TOM4CWB]

Parsley,

As long as the loaf of bread is backed by some land to grow the wheat... it is a zero sum issue.

I am NOT making the rules... nor is PM Harper.

I am a simple observer... just commenting on what I saw!

[bduke]

Parsley... Your concern regarding the diminishing value of money is the greatest threat to
reducing a so called "middle class".

Governments are aware of this, many cultures and investors realize it also.

This is why real estate, precious metals, commodities, art works etc. are important
investments.

But the so called "middle class" tend to have homes, vehicles, toys, and videos of their trips
as assets.

Democracy as we know it tends to askew priorities as well, hence the litany of campaign
promises.... and subsequent Country indebtedness.

Still economist look at compounding growth rates and debt to GDP ratios etc., and the funds
tend to invest accordingly.

The theory being that an economy compounding at 2 to 3 % greater than its debt growth will
eventually be attractive.

Time will tell.

Cheers... Bill