Well Gold ATMs actually.
China is one of the world's largest producers and purchasers of precious metals, especially gold and silver. Beijing has now unveiled its first gold ATM machine in a shopping district. More than 2,000 will be installed in the next two years.I wonder if this is meant to sop up the money that no longer has confidence in Chinese real estate?
I got an e-mail today from some political organization complaining about the Solyndra deal in these terms.
Start with labor costs. Thanks to the influence of labor unions, Solyndra paid its employees an average of about $100,000 per year. In China, a salary of $100,000 is unheard of. Most factory workers get paid about $.80 per hour. Rarely do they make more than $200 per month. America cannot compete in the face of this disparity.Sure we can. We just won't do it by throwing labor at problems. We will have to use our brains. A commodity that is more than evidently in very short supply. Especially among the politicos.
The AEI Outlook Series takes a look at China and sees a few bumps in the road. Here are the main points:
China is facing destabilizing inflation; capital has flowed into China must faster than it has flowed out, in part because Chinese residents are prohibited from investing abroad.Yes. Trouble in China would be very damaging to the world economy. But it would also damage China.
China's reported inflation rate on consumer goods rose to 5.4 percent in March, but its implied inflation rate is 8.4 percent--a large discrepancy suggesting that China is underreporting its inflation rate.
Chinese authorities have taken some steps to lower inflation, but they may be delaying more drastic measures to avoid instability before the 2012 transfer of leadership.
China has the second-largest economy in the world--accounting for one-third of global growth in 2010--so a Chinese hard landing would be very damaging to the global economy.
On a more fundamental level, China is tracking what one might call the Asian "work, save, and invest" model that proved so unsuccessful for Japan after its economic boom period in the 1970s and 1980s. During those decades, its financial sector failed to develop, and Japanese citizens were discouraged from investing abroad. Inside Japan, investment-allocation decisions were made largely by government agencies that recycled household savings deposited in Japan's Postal Saving System and its sheltered banks. As a result, Japan's financial sector developed far more slowly than its production sector. Saving was very high, as in China today, so there was a huge supply of funds for the government to allocate inside Japan. The government agencies favored investment in Japanese manufacturing facilities, especially those in the export sector.
As Japanese citizens grew wealthier, by the 1980s they looked for ways to store and enhance the wealth they were accumulating as a result of their hard work. They invested in the Japanese stock market and even more vigorously in Japanese real estate. In the late 1980s, the Japanese real estate bubble grew so large that the emperor's palace in central Tokyo was said to be worth more than the state of California. Of course, the bubble burst a year later, and Japan entered a lost decade that included wealth losses equal to nearly three years of national income followed by persistent deflation and generally stagnant growth. These are problems that persist to this day in Japan, which sadly has a whole new set of problems from its recent tragic earthquake and related nuclear disaster.
Japan Posts Second Biggest Trade Deficit In History"Increasing uncertainty", is econo speak for: "Things are going from bad to worse."
For those who may not have noticed it, the headline says "deficit" and pertains to Japan: once upon a time a booming export economy. The reason: the ongoing collapse in export trade, after May exports dropped by 10.3% from a year ago, and just better than April severe economic contraction of 12.4%. Consensus was for an 8.4% decline. The net result was a monthly deficit of 853.7 billion yen, or $10.7 billion, the second biggest inverse surplus ever. And just like in Europe, where things are going to go from insolvent to perfectly solvent any minute now... just not yet... so in Japan the economic renaissance which will cause the economy to surge (unclear how: no new monetary stimulus, and the recently announced fiscal stimulus of Y500 billion in new loans will do precisely nothing to boost anything except for some corrupt bureaucrats Swiss bank accounts) is coming any minute.... just not yet. Bloomberg says: "Shortages of power and parts have disrupted production and slowed overseas sales, prompting Japanese companies including Honda Motor Co. to forecast weaker earnings. Higher unemployment in the U.S. and weakening demand in Asia indicate Japan won’t be able to rely on global demand to pull itself out of a slump caused by the quake." And the understatement of the weekend comes from BNP economist Azusa Kato: "The state of the global economy is a little worrying. Both the U.S. and Europe aren’t doing that great and emerging economies are also tightening at an incredible pace, increasing uncertainty."
#Radioactive Tea in France: Shizuoka Governor Tells France Tea Is Safe, "No Problem"The follies going on in the treatment of the nuclear disaster in Japan are so numerous, depressing, and foreseeable that I have done nothing for over a month in cataloging them.
Besides, the tea leaves may not be from Shizuoka anyway, says his government.
The Oxford PhD (in comparative economic history) governor of Shizuoka strikes again, responding to the news that the French authorities confiscated the radioactive tea from Shizuoka Prefecture at the Charles De Gaulle Airport in Paris for the high radioactive cesium count (1038 becquerels per kilogram), more than twice the safety limit for the EU. (I'm rather surprised that it's that high in the EU.)
There is a growing trend in the Chinese blogosphere to vocalize praises and expressions of support for Hitler. If Chinese authorities fail to address this problem, dangerous consequences may ensue.Talk about your revisionist history. This has got to take the cake. Birthers and Truthers can't hold a candle to this one.
The Rumor
A rumor is spreading virally throughout the Middle Kingdom that asserts that Austrian-born Hitler was raised by a family of Chinese expats living in Vienna. According to the rumors, a family named Zhang found young Adolf - born on April 20, 1889, when he fell on hard times as a young man in Vienna.
They took him in, sheltered him, fed him and paid for his tuition. As a result of this assistance, Hitler held eternal gratitude and admiration for the Chinese people. The rumor also asserts that Hitler secretly supported China in World War II, and that his ultimate ambition was to conquer the world in order to share power with China, with everything west of Pakistan to be administered by the Fuhrer, and everything east of Pakistan the province of the Chinese people.
This rumor apparently resonates deeply with the Chinese Internet generation. On May 10, 2011, a user of Kaixin, the Chinese equivalent of Facebook, posted a version of the rumor on his wall. The post attracted an enormous following, with more than 170,000 views and 40,000 comments.
Hitler did not admire Chinese people. In fact, nothing could be further from the truth. Hitler regarded Chinese as an inferior race. Many Chinese bloggers are quick to point out that Hitler once said, "The Chinese people are not the same as the Huns and Tartars, who dressed in leather, they are a special race; they are a civilized race."The article goes on to discuss the sorry state of history education in China and compares it to the similar sorry state of history teaching in Japan. Read the whole thing.
This quotation only stands for the proposition that Hitler considered the Chinese to be higher on the racial totem pole than Mongolians, but it says nothing about where they rank overall. In fact, Hitler believed that Aryans were the only "culture-creating race", while the Chinese and Japanese were merely "culture-bearing".
Hitler viewed the Chinese people as an inferior race, and actually blamed them for many of the world's problems. For more information, see The Racial State: Germany 1933-1945by Michael Burleigh.
Hitler did not support China in World War II. China's principal support in World War II came from the United States. In 1941, the American Air Force created a special squadron called the Flying Tigers (fei hu) to fly covert missions over East Asia to defend the Republic of China against Japanese incursions.
Government Motors celebrates the Chinese Communist Party. Really.
In late 2010, General Motors agreed to sponsor a propaganda film celebrating the 90th anniversary of the Chinese Communist Party (CCP). The CCP made film titled (translated to English) “The Birth of a Party” or “The Great Achievement of Founding the Party" is set to premiere all over the Communist nation on June 15 reported China AutoWeb last September.You can't make this stuff up.
This is a story I have been meaning to get to for over a week. I've been lazy. But with the "China's Rise America's Fall" stories being so prevalent these days I thought some counter balance was in order. And what are the riots about? Inflation and wages.
Yesterday we reported news that has so far received almost no media exposure, namely that thousands of striking truck drivers had poured into Shanghai's Waigaoqiao zone, one of the city's busiest container ports, protesting over "rising fuel prices and low wages." Today, via Reuters, we learn that this situation has escalated materially, and progressed into violence: "A two-day strike over rising fuel prices turned violent in Shanghai on Thursday as thousands of truck drivers clashed with police, drivers said, in the latest example of simmering discontent over inflation. About 2,000 truck drivers battled baton-wielding police at an intersection near Waigaoqiao port, Shanghai's biggest, two drivers who were at the protest told Reuters. The drivers, who blocked roads with their trucks, had stopped work on Wednesday demanding the government do something about rising fuel costs, workers said." And while we have violent uprisings over austerity in Europe, now we have violent strikes over inflation in China?So the next time you hear about the swift and painless ascent of China don't be so sure. At the very least it will not be painless.
by PulauHantu29The net of the comments? A hard landing is predicted for China.
The PRC "injected" over $800 Billion (officially) into their economy, i.e., directly into their RE and stock market (na dinto the pockets of wealthy RE developers) and creating more Billionaires in China then in the USA in just two year! Add to that the trillions of "hot money" and those markets became a bigger Bubble then the USA subprime imo.
Last year I watched TV interview various people complaining about rising food and housing...the PRC CB did nothing.
Last November I watched PBS interview a Shanghai realtor who said "prices are rising over 8% per month"...the PRC CB did nothing. Rural peasants were complaing that food was too expensive. One old man said "green peppers rose 300% in one month"....no action was taken to curb the problem.
Now we have riots and protests and the gubberment there is behind the curve.
There has been an outbreak of foot and mouth disease in South Korea.
The severe foot and mouth epidemic that started in South Korea at the end of November could have even more serious repercussions for public health. Some 3m head of livestock have already been slaughtered but now the environment ministry is concerned about burial of the carcasses.Could it infect humans? Yes but it is rare.
Under the pressure of events some cattle were buried alive and the authorities sometimes failed to take the necessary precautions: digging pits four or five metres deep and lining them with two layers of plastic sheeting. Farm animals were buried at more than 4,000 sites, often in easily accessible spots, for instance beside rivers.
As spring temperatures rise the corpses will start to rot. Rainfall leaching through the pits, above all during the June monsoon, could contaminate rivers and aquifers. This could be a hazard for drinking water with the risk of another outbreak of foot and mouth disease. To prevent "an unprecedented environmental disaster" the environment minister Lee Maanee last week called for "a full, detailed study of all the [burial] sites before spring".
According to a survey carried out in the eastern province of North Gyeongsang, where the epidemic started, more than one in 10 burial sites needs to be reinforced. New pits may be dug and lined with concrete.
The new problem comes on top of those posed by the epidemic itself, which has already cost South Korea 2,000bn won ($1.75bn) and pushed up food prices. The price of pork rose by nearly 12% in January alone. With about 5% of beef and dairy cattle having been destroyed the authorities are afraid there may be milk shortages, production having dropped by as much as one-fifth in some places.
Because FMD rarely infects humans, but spreads rapidly among animals, it is a much greater threat to the agriculture industry than to human health. Farmers around the world can lose huge amounts of money during a foot-and-mouth epizootic, when large numbers of animals are destroyed and revenues from milk and meat production go down.And there are animal vaccines. It is looking bad for South Korea. But at least they have resources to buy their way out of the problem.
SEOUL—A swiftly moving disease that has decimated South Korean livestock and damaged the country's food production now appears to be out of control in North Korea.And of course China, which borders North Korea is at risk. This is going to cause a spike in food prices world wide.
It is unclear where or when the latest outbreak of the airborne, easily transported illness known as foot-and-mouth disease began on the Korean peninsula. But in a sign of the pressure North Korea is facing over the issue, its state media on Tuesday reported that the outbreak originated in the South and that other countries, including Malaysia and Mongolia, have been hit with outbreaks in the past.
North Korea, which faces chronic food shortages and whose authoritarian government resists interaction with outsiders, hasn't taken any apparent steps to cull animals infected with the disease, as South Korea did.
Visitors to North Korea reported as far back as December they suspected the country was battling foot-and-mouth disease, but North Korea's state news agency didn't officially confirm the outbreak until Thursday when it said "more than 10,000 head of draft oxen, milk cows and pigs have been infected" and "thousands of them died."
In addition to reducing the North's already-constrained food supply, the disease's spread to oxen, widely used in place of tractors there, will limit the ability of North Korean farmers to carry out planting and other tasks.
Foreign Policy Magazine thinks the rise of China and the fall of America is inevitable.
...when it comes to the broader geopolitical picture, the world of the future looks even more like a zero-sum game, despite the gauzy rhetoric of globalization that comforted the last generation of American politicians. For the United States has been acting as if the mutual interests created by globalization have repealed one of the oldest laws of international politics: the notion that rising players eventually clash with established powers.Well that is optimistic. If it weren't for the fact that China with its one child policy is aging at the rate of about .9 year per year while the US is holding more or less steady at around 40 years. China has a 20 year window before demographics get them. At roughly $4,000 per capita income they will have to grow 10X larger to have a per capita wealth equal to the US.
In fact, rivalry between a rising China and a weakened America is now apparent across a whole range of issues, from territorial disputes in Asia to human rights. It is mercifully unlikely that the United States and China would ever actually go to war, but that is because both sides have nuclear weapons, not because globalization has magically dissolved their differences.
Following the now extremely well documented surge in short-term SHIBOR [Shanghai Interbank Offered Rate - ed.] and Chinese repo rates, it appears that banks have begun attempting to extract the missing liquidity from end consumers. Various Chinese commercial banks raised lending rates between 10 and 45% over the benchmark rate because of a shortage of funds, the China Securities Journal reported today, citing an unidentified bank official. In the meantime, SHIBOR refuses to pull back, hitting an unsustainable 8.05%, which is worse than Portuguese 10 year rates. Will this sustain? Unclear - the Chinese new year must pass and the recent surge in snowfalls will have to recede before a steady state evaluation can be made, however as we have been warning since December, in a country having one of the biggest asset-liability mismatches, the negative curve convexity on tightening fears, will blow up the near end, isolating bank liquidity. To say that this is bad news if it persists is an understatement.Uh. Oh.
Will there be a reopening of the war between North and South Korea soon? Some people think so.
In Moscow's bleakest assessment of the situation on the Korean peninsula yet, Russian deputy foreign minister Alexei Borodavkin said tensions between the two countries were running at their highest and most dangerous level in a decade.And that is not the only hot spot that could erupt. Japan and China are not exactly on the friendliest of terms these days.
"Tensions on the Korean Peninsula could not be any higher. The only next step is a conflict," he told foreign policy experts at a round table on the subject in Moscow.
His prediction came two months after North Korea vowed to wage "a sacred war" against South Korea and its biggest backer, the United States.
The USS Hawaii, a nuclear-powered attack submarine, arrived earlier this month at Yokosuka, home port of the U.S. Seventh Fleet, one more asset in America’s naval buildup in Northeast Asia, which can be viewed as a direct result of Chinese assertions of hegemony over the East China and South China Seas.It is nice to have a strong American President in office during these troubled times. Ah. Oh? Well never mind. Which reminds me: Miss Me Yet?
In July three Ohio-class ballistic missile submarines surfaced more or less simultaneously at Pusan, South Korea, Subic Bay in the Philippines and Diego Garcia in the Indian Ocean. The three are converted Trident missile submarines, having been stripped of their intercontinental ballistic missiles and stuffed with Tomahawk cruise missiles - 140 per sub – armed with conventional warheads.
The Hawaii is part of new class of attack submarines that are configured to operate in shallow, near-shore waters. As the submarine’s captain was happy to tell the Pacific Stars and Stripes newspaper on arrival, the sub has the ability to maintain a “persistent presence off shallow waters.”
When it comes to China everyone who is even slighly familiar with their financial problems is waiting for the first shoe to drop.
Imagine that your local city and county controlled all land rights, and the only ownership a private builder or developer could secure was a long-term lease. Now imagine that 40% of the city and county's revenues come from the lease fees paid by developers. Next, imagine a giant real estate bubble has priced most residents out of the market, and that the local governments are reaping huge gains as the development rights and leases they sell are skyrocketing.Our problems in America stem from the opposite impulse. Getting low income people into houses. But the fundamental impulse is the same: government can distort markets in ways that will benefit the country. No it can't.
Can you say conflict of interest?
That's the Chinese real estate dynamic in a nutshell. Local governments have every incentive to push lease prices higher, further fueling China's real estate bubble, and zero incentive to build low-cost housing for the average citizen
"With access to almost unlimited no-cost credit from the state-controlled banking system," he wrote, "these behemoths have abused their financial clout and plunged headlong into the real estate market, snapping up high-priced land and investing in high-end residential housing units that now sit empty across the country."Yes it does. Here in the US we can name names. Fannie Mae. Freddie Mac. Barney Frank. Chris Dodd. And don't forget Senator ∅bama.
Once you understand this dynamic, it's not difficult to see why China's housing bubble will end badly. Local governments are so heavily dependent on development fees and taxes for their revenues that any fallback in new development will spell catastrophe for city and regional government budgets.
Who will lose when the bubble inevitably deflates?
Residents will suffer because government services will have to be slashed as revenues from development fees collapse.
The Chinese investors who overpaid for grossly inflated luxury condos will suffer massive losses, developers dependent on a fast-rising bubble market will go bust, and somebody will end up covering the losses as bankrupt developers renege on their loans.
Since most of the loans came from government-owned banks, then that "somebody" will be the Chinese taxpayer. Sound familiar?
BEIJING (AP) - Chinese steel mills and mobile phone factories are being idled and thousands of homes in one area are doing without electricity as local governments order power cuts to meet energy-saving targets set by Beijing.Curbing the production of plant food (AKA greenhouse gases) is an economy killer. Fortunately we live in a free country where Present ∅bama has promised to make the price of electrical energy skyrocket. Different method. Same result.
Rolling blackouts and enforced power cuts are affecting key industrial areas. The prosperous eastern city of Taizhou turned off street lights and ordered hotels and shopping malls to cut power use. In Anping County southwest of Beijing, an area known as China's wire-manufacturing capital, thousands of factories and homes have endured daylong blackouts over the past two weeks.
"We can't meet deadlines for some orders and will have to pay penalties," said Han Hongmai, general manager of Anping's Jintai Metal Wire Co. "At home we can't use the toilet" on blackout days due to lack of power for water pumps, he said.
While the U.S. and Europe struggle with flagging economies, the power outages are symptomatic of China's torrid growth and officials' capricious use of their powers to meet the authoritarian government's goals.
China's economic expansion, which hit 10.3 percent in the latest quarter, blew holes in government efforts to curb surging energy demand, pollution and emissions of climate-changing greenhouse gases. Beijing told local leaders to clamp down and stepped up pressure by sending inspectors to see the order was carried out.
There are labor troubles in China.
The wave of strikes rippling through China's southern manufacturing heartland have forced the country's officially sanctioned unions to try something novel: speak up for workers or risk being permanently sidelined.So where is China headed?
Migrant workers, wary of company unions seen as ineffective or allied with management, chose to shut them out altogether when they made demands for higher wages and better benefits. It was a wake-up call for the umbrella group, the All-China Federation of Trade Unions, and their patrons -- the communist leaders who thought they could rely on it to help keep a tight leash on labor unrest.
"It's a very pivotal time. China must change the mode of economic development or it will meet difficulties. You can't sacrifice workers to drive the economy any more."Japan made the transition from a low wage economy beginning about 20 years after the end of WW2. China has taken a little longer. About 30 years from the start of the Deng Xiaoping economic liberalization era. China started from further behind than Japan and in addition had the handicap of Communism and Mao's Great Leap Backwards. So they are not doing too bad.
Reformers within the union body are pushing for change, and they're finding support in the upper ranks of the ruling Communist Party who hope a more vigorous national union will placate worker frustration as China attempts what could be a rocky transition from being a predominantly low-wage manufacturing economy.
Dr. Housing Bubble is looking at the state of the real estate market. It is not good. Not good at all.
Let me start with a quote that explains the above chart.
The ultimate sign of housing distress is foreclosure. This should be obvious. So for all the talk of a housing recovery I point to the above chart. Today, as in right now, we are in record territory for the number of homes in foreclosure. 14 percent of all U.S. mortgages are in some form of foreclosure.So are things actually improving? Would the government lie to you? No and yes.
...foreclosure filings are still at record levels. In fact we are heading to a 3.5 to 4 million foreclosure year in 2010! This is somehow a positive thing for the market? People forget that foreclosures happen because of underlying economic issues. If everyone was making big bucks and homes were going up in value then we wouldn’t have this problem. Just look at the number of foreclosure filings back in 2005. Roughly 60,000 to 70,000 per month. Last month we hit 367,000+ which was an all time record. When foreclosure filings get back down to more normal levels, then we can say the housing market is improving.If the numbers are still rising then things are not improving. No matter what the government says.
96.5% of all originated loans are now government backed. Remember Fannie Mae and Freddie Mac and their epic continuing losses?The housing market has been nationalized. As in bought by the government. I suppose it is better than outright theft. That comes later when taxes have to rise to pay for the "fun".
Banks are moving on current REOs (the small batch that they have) and pumping this up as good news but the 90 days plus foreclosure number is still trending up. How is this magic done? We’ve talked about it above. You simply don’t move on delinquent homeowners. You ignore actual losses. You mark your assets to fantasy valuations.So that may explain why the economy seems to be trending up. A LOT of home owners are living rent free. Why does that make any sense at all? Two reasons come to mind. One is that if the banks had to acknowledge their losses they would be failing. Which is to say the banking system is kaput. Another reason is that a property with people living in it will be better maintained than one that is vacant.
In total the housing market is in worse shape today than it was a few years ago.
The bailouts have been one large transfer of wealth to the banking sector. Remember that the bailouts were brought about under the guise of helping the housing market and keeping people in their homes. None of that has happened. Ironically the only thing that seems to keep people in their home is when they stop paying their mortgage! If that is the strategy we have arrived at after $13 trillion in bailouts and backstops to Wall Street we are in for a world of problems.Yes we are.
The popping of China's current housing bubble -- considered inevitable by regional experts such as Andy Xie -- could have widespread consequences. If housing turns down in China, China's growth could slow or even decline. And since the entire world is looking to China to lead global growth, then that could spell major trouble for the "global economy is recovering" story.I can't see this turning out well. Of course China has large reserves of other country's currencies. And if they spend it all? Then what?
The reflation of China's real estate bubble has a number of causes, and the most obvious one is that nation's stupendous $586 billion stimulus, which was packaged with efforts to promote real estate lending and development to boost growth. According to China's central bank, new home mortgages in the first nine months were quadruple the amount borrowed a year earlier.
In terms of GDP -- China's GDP is $3.3 trillion compared to $13.8 trillion for the U.S .-- China's $586 billion stimulus is three times as large as America's $787 billion stimulus. China's stimulus spending is a heart-pounding 17.8% of their GDP, as opposed to America's comparatively modest 5.7% of GDP.
I have been wondering about China. Especially the threats to America over arms sales to Taiwan. And I wonder if the threats aren't mostly for internal consumption. What made me think of this was the popping of China's real estate bubble.
Why internal consumption? To justify a large army. And why a large army? To handle unrest caused by possibilities such as:
Wow, China fighting inflation with predictions of 50% commercial vacancy rates in Beijing, Japan is Japan, Vietnam is worried about their Dong, and Europe and South America are a mess - it looks like it’s up to America to save us because, as I said earlier in the week - do you really have anywhere better to put your money?China's government depends on growth to keep the population pacified.
A most interesting comment I found at Wretchard's. More like vitriolic rant actually.
Joe Hill:I'd say Mr. Obama has done excellent work. In just over a year he has convinced about half the country he is not up for the job. An outstanding accomplishment rarely exceeded by any President.
The American people aren’t all that smart and they aren’t all that interested either most the time, but once you get their attention and they actually bear down and concentrate on the problem at hand for a couple of minutes and make a decision it is political suicide to buck them. This health care bill is a done deal. It is as done as this mornings coffee that has been sitting on the burner all day.
The people thought about it and decided it sucks. If Massachusetts won’t buy it no one will. Obama is flogging a dead horse here and it is political suicide. All anyone wants to know is how are you going to get the economy going, create jobs, and get the deficit down… oh yeah and we don’t want no stinking carpet kissing camel jockeys blowing stuff up. We don’t care if you try him or just chain him up to a pickup truck and drag him for a few miles after waterboarding him, his cousin, his cousine;s mothers pet cat and three random totally innocent Islamic “moderates”. Just do it in a hurry. Do it quietly. Do it out of sight and don’t tell us about it – or anyone else for that matter.
Kill or enemies and keep the economy humming. It is as simple as that and he has about another three months to convince the country he is up to the job or he is going to have to double the guard at the White House gate.
The debt is unsustainable. We have lost 3 or 4 million jobs in the last year. The stock market is about to take another dive. Iran is developing a bomb. China’s economy is a house of cards. The Indians and illegals are taking all our jobs and depressing wages, and “it is Bush’s fault” doesn’t cut it any more. We fired that guy and hired Mr Hopey Changey to fix things and all they are doing is getting worse. On top of everything else we are up to our eyeballs in snow.
Feb 8, 2010 - 11:53 pm
I did a post yesterday about China's bubble risk. Nothing official mind you. Just some observations and an anecdote. Today we are getting the word from an official source.
A senior policy adviser to China's central bank said Monday that asset bubbles were a concern for the nations' policy makers, reflecting official unease about the rapid gains in real estate prices, according to reports.And enforced higher wages (as opposed to market wages) will help Chinese competitiveness how?
Fan Gang who sits on the monetary policy committee of the People's Bank of China told reporters that surging asset prices were the "the real worry" for the economy, according to a report by Dow Jones Newswires.
Fan also praised recent efforts to rein in excessive liquidity as "good, timely and necessary," even while he downplayed inflation risks, saying gains in consumer prices were unlikely to be a major problem this year because of spare capacity and stable food prices.
In a separate development during the weekend, the mayor of Shanghai said the city plans to raise the minimum wage by 15% and accelerated plans to build subsidized housing.
I get a small percentage which helps me buy books and electronic maintenance items (like printer cartridges).
It looks like real estate in China is going through a massive bubble. It is still on the upswing side.
We don’t really have a view on when it will end; [but] we do have a view that this is a bubble. Real estate is very much driven by government policy. This year we have RMB 4 trillion through the stimulus package, another RMB 6 trillion from municipal bonds, another RMB 10 trillion from bank loans. We have RMB 20 trillion in the system and it all finds its way to real estate. If the government next year decides to continue the relaxed monetary policy the market will continue like this, regardless of whether this is wasteful investment or not — people will still buy and we will still be building and selling.And how much is that worth In $US?
These buildings are not fully occupied and people should be worried about it. I am sure the government is worried about it, but what do you do, they want the stimulus and if you want to create jobs then this is a by-product.
Not to detract from her point, but I should note that I tally the total influx of funds somewhat differently. I think she is double-counting the RMB 4 trillion government stimulus, which was funded half by bank lending and half by municipal bonds. The combined figure, as I calculate it, is more like RMB 16 trillion, or US$2.4 trillion.So how much is that in US dollars?
BEIJING -- China's economy expanded by 6.1 percent year-on-year in the first quarter of 2009, official data showed Thursday.Since the numbers are never as precise as the figures show, let us say that it is $3.8 trillion. And a $2.4 trillion stimulus represents 63% of the GDP. That is a lot. The Chinese can pay for most of it in cash. But that leaves them vulnerable to the next shock in the market place.
The quarterly growth was the slowest in the past 10 years as the global financial crisis continued to affect the world's fastest-growing economy. It was 4.5 percentage points lower than the first quarter of 2008 and down 0.7 percentage points from the previous quarter.
Gross domestic product (GDP) reached 6.5745 trillion yuan ($939 billion) in the first quarter, Ma Jiantang, director of the National Bureau of Statistics (NBS), told a press conference.
Today I visited Beijing’s most stunningly dysfunctional, catastrophic mall, called The Place, and all I could think about was what I wrote back in 2006. Made to look kind of like Versailles on the outside, The Place is an irrational maze of stores and eateries that seems to have been designed to turn off and turn away customers. It has stairways that lead nowhere, unmarked elevators that take you to surprising places, not to mention a generally chintzy feeling created by all the faux marble and Grecian columns; it always looked pompous, but now it’s looking seedy and run-down as well.The author has some ideas on why it got so bad.
The Place is around the corner from my office, and this was my first trip back in about two months, I was shocked at what I saw. Fifty percent of the eateries in the basement were boarded up. The cheap food court, too, was gone, covered up with ugly blue boarding, making the basement especially grim and dreary. The two good restaurants there, Ganges and Master Kong Chef’s, were still thriving. The few others that remained seemed to be just hanging on.
That same night I went by The Village, which seemed so cool when it first arrived and now seems so unnecessary aside from the Apple store and a couple of restaurants. Same thing as The Place: lonely clerks looking plaintively out the store windows, eyes begging you to come in and buy something. But no one does. There is simply too much stuff, too many stores, and no buyers. Do you have to be a rocket scientist to conclude this is unsustainable? And to top it off, they are now finishing the second Village mall down the street, across from the Poppa Bear of all disaster malls, 3.3. All I can say is, WTF??
I’m predicting The Place and many of its sister ghost malls, shunned by customers overwhelmed by so many malls to choose from, each selling the same crap that no one can afford nowadays, are going to experience a catastrophe, if they haven’t already, and will ultimately become burnt-out, boarded-up shells. In turn, this is going to throw a lot of fuel on China’s current financial crisis. Real estate will be further cheapened, and the general misery unique to times of deflation will set in. Brother, can you spare a dime?
I told them this was coming 2.5 years ago and no one listened. The day of reckoning, the moment of truth is here. Even if things pick up, these malls are hopeless. Like the Mandarin Oriental, they will need to be razed and replaced with something useful, like affordable middle class housing (wishful thinking on my part). If not, Beijing could become a city pockmarked with looming dinosaurs, huge husks of once breathtaking buildings, now vacant and decaying, like so many of the Olympic structures.The government in China is doing the same thing the government of the US is doing. Trying to reflate the bubble instead of marking down assets to their real value. It will end badly. In the US and China.
I kind of understand why this overbuilding happened, as the economy became a vicious inflationary circle. Now we are experiencing the down wave, and it’s just starting. As we crash, The Place and many other useless mega-malls like it will serve only as reminders of the excesses of good times that we fooled ourselves into believing would last forever. Their time has now come. In fact, their demise is long overdue.
Forbes Magazine is looking at the numbers coming out of China and comes to the conclusion that they don't add up.
China watchers have been dubious about the quality of Chinese economic data for some time. And a recent spate of seemingly conflicting data has fuelled that criticism.Craig Pirrong at Seeking Alpha comments on the Chinese numbers.
One particular quibble involves the relationship between electricity usage and industrial value added -- another measure of output. The worry is that failings in the way official data are compiled may be generating results that are giving investors misconceptions about the health of China's economy.
During the first half of this year, industrial value-added rose a robust 7 percent, while total electricity usage fell 2.24 percent. This seemingly implies that output is growing and contracting simultaneously. The divergence has attracted attention, not least because industry is half of the economy and electricity usage is one of those bits of data that is hard to massage. Even Chinese Premier Wen Jiabao has openly said that electricity usage is the data that he trusts most.
First, reported Chinese growth is a chimera. Chinese government statistics appear no more reliable than Soviet figures. The disconnect between electricity generation changes and reported growth is highly suspicious, especially for a manufacturing-intensive economy noted for its energy-intensity as well. The focus on big state firms that don’t produce what people want, and the slighting of small firms that do, in the collection and reporting of statistics also raises red flags (and not of the Red Flag of Revolution! variety).It seems to me that a number of governments around the world (especially the USA) think they can inflate their way out of the problems caused by inflated bubbles. What happens when that is no longer possible? We get the worst of all possible worlds. Low or negative growth and inflation.
Second, Chinese growth reporting is eerily like 90s-style earnings management. There’s a target, and the numbers WILL be massaged in whatever way necessary to hit the target. Indeed, some of the tactics bring sordid episodes like Enron and WorldCom to mind.
Third, it seems that the Chinese are betting on a recovery in the West, and hence a concomitant recovery in exports, and are determined to keep up the earnings management and the credit stimulus until that happens. That is a highly risky strategy. If the desired recovery doesn’t happen before the bubbles collapse, China will face both a domestic demand and a foreign demand crunch. Moreover, even if “successful” in the sense that a recovery in exports allows the government to ease up on the stimulus, it will have contributed to a substantial misallocation of capital and created the risk of substantial inflation.
All photovoltaic industries in the world depend on government subsidies. China is going down that road as well.
Shi Dinghuan has stated that what China's solar power manufacturing industry needs is a more active set of government policies to support and subsidize the adoption of solar power domestically, along the lines of the industrial policies that have created significant growth in the Chinese wind industry (see recent article). Because the use of solar power in China has been insignificant, the potential for growth is outstanding.This may make some sense in areas of China that are far from power lines. It makes no sense where access to the Chinese grid is available.
Very recently the framework of such policies intended to jumpstart domestic solar power demand and turn around China's overly export-oriented PV industry has begun to emerge. In late March, the Chinese Ministry of Finance promulgated its {Interim Measures for the Administration of Government Subsidies of Building Uses of Solar Energy Photovoltaic Power} (called "Interim Measures") and the accompanying {Implementing Opinion Concerning Speeding Up the Promotion of the Use of Solar Energy PV Power in Buildings} (called "Solar-Powered Buildings Promotion Opinion"), which together provide a framework for the implementation of China's "Solar-Powered Rooftops Plan."
Asia's financial markets greeted China's massive stimulus plan warmly, but with caveats that underscored concern that economic stability in China won't by itself reverse global trends.And that is not all the Chinese stimulus plan will do. It is also intended to stimulate the Chinese manufacturers of consumer electronics.
The size of the stimulus plan solidified Beijing's position as a pivotal economic policy maker in the region and the world. "It lends weight to the importance of China," said John Vail, chief global strategist at Nikko Asset Management in Tokyo. "But of course, China is leaning against some pretty serious headwinds."
Asian currencies, stocks and commodity prices bounded higher from Shanghai to London on Monday, hours after the government unveiled a two-year stimulus package it valued at around four trillion yuan, or $586 billion. The government said it would build infrastructure, fund housing, cut business taxes and encourage banks to lend money, all in a bid to offset slowing global growth by boosting the spending power of its people.
...a consumer stimulus plan implemented by the Chinese government designed to drive consumption of electronics and appliances by citizens living outside the major urban regions," he said. "This has prompted a supply chain scramble in select markets, namely LCD TV, netbooks, consumer based notebooks and low-end handsets."It will be interesting to see if the effort has its intended results. One possibility is increased unrest caused by Chinese citizens who will find it easier to organize protests against the Chinese government.
There are other positive signs. "While there are widespread rumors of more Chinese stimulus to come, some suppliers are expressing skepticism that these recent order gains will extend past the short-term," he added.
Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.Can we expect to hear (through clandestine channels) of tea parties (or equivalent) in China? Time will tell and hopefully the Sunday Times will report it.
The research was conducted for The Sunday Times over the last two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It found that the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.
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. I can use the money - well actually I will use the proceeds to buy something from Amazon. I get a better deal that way.
