Seeking Alpha
Profile| Send Message|
( followers)  

China just shut down Skype, the free/cheap internet phone calling service, by making it illegal.

While attention grabbing, the Skype move is hardly a surprise as Facebook, Twitter and YouTube are already blocked in China, and Google (NASDAQ:GOOG) shut down its Chinese servers last year after government pressure.

It's very hard to see how this type of thinking on the part of China's Communist Party leadership will serve the country's economic interests over the longer-run. China economic historians are well aware of how inward turns have worked out for the middle kingdom in the past. During the Ming dynasty, China turned inward, largely shutting itself off from the rest of the world, and the country's subsequent economic development suffered.

While China's technology blocking moves have more to do with the country's longer-term competitive position, two factors are weighing heavily on China's immediate-term prospects:

  1. Trade tension between China and the U.S. has been on the rise, leading to talk of a U.S.-China economic war.
  2. The Chinese real estate market, which according to legendary short-seller Jim Chanos accounts for 60%+ of China's economy, remains in a frenzied bubble even with recent government moves to reduce lending activity through increased interest rates.

One of the biggest question marks going into 2011 has to be China and whether the country can manage a soft landing, or if in fact the mother of all bubbles will finally burst. If the latter happens there will be significant knock-on ramifications for perhaps nearly every investment sector (and particularly commodities) around the globe.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: China: Soft Landing or Bubble Bursting in 2011?