Are you ready for the China crash (if it happens)? What seemed like an invincible story has seen...

Are you ready for the China crash (if it happens)? What seemed like an invincible story has seen a shift in sentiment. An economic downturn, defined as less than 7% growth, would likely be due to inflation or a collapse of shaky real estate. In a Chinese market correction, you'd want to own FXP or short FXI, GXC or PGJ.

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Comments (17)
  • Tom B
    , contributor
    Comments (3620) | Send Message
    Well, any accounting done in China pretty much make Bernie Madoff's dealings look transparent. I'd sooner invest in the local organized crime syndicate than trust my money to the snakes that constantly send us tainted jewelry, lead-filled jewelry, and unending currency manipulation.
    16 Jul 2011, 08:25 AM Reply Like
  • Monngie
    , contributor
    Comments (973) | Send Message
    Kind of unfortunate the syndicate didn't think about going public. Err....maybe they did and we just don't know it. Maybe that's why they call them banksters.
    16 Jul 2011, 02:46 PM Reply Like
  • D. McHattie
    , contributor
    Comments (1844) | Send Message
    Yes, I'm 'ready' in the sense that I have some cash and some Chinese companies that I would like to pick up at a bargain.


    I fully expect a minor crash in China but also believe it will be short-lived and healthy.
    16 Jul 2011, 08:38 AM Reply Like
  • laogao
    , contributor
    Comments (94) | Send Message
    Since this is a site for investors, could you maybe share one or two companies you are considering?
    16 Jul 2011, 02:57 PM Reply Like
  • D. McHattie
    , contributor
    Comments (1844) | Send Message
    ABAT - it's a long-shot gamble not for the faint of heart based on the belief that the allegations of fraud are false. The business of making and selling ebikes in China should be huge in the coming few years.


    KNDI - another play on electric vehicles (cars) in China. Also very speculative but they have a great relationship with utilities and the superior model of swapping batteries in central locations rather than having users charge them at home.


    Let me say, by no means is this a recommendation that anyone should buy these. I have a much higher risk tolerance than most people and even I would only put a little money in each of these right now.


    So the information in this post and $5 will get you a coffee at starbucks.
    17 Jul 2011, 01:12 PM Reply Like
  • Joe Morgan
    , contributor
    Comments (1608) | Send Message
    Oh, so a growth of 7% is dissapointing? That it is still phenomenal growth....


    Oh....China GDP growth in 2nd Quarter was 9.5%....
    16 Jul 2011, 08:50 AM Reply Like
  • LKofEnglish
    , contributor
    Comments (4385) | Send Message
    subtract Chinese growth from Chinese inflation figures and you get about 2 percent growth. Time to pop Mr. Real Estate bubble.
    16 Jul 2011, 10:41 AM Reply Like
  • Joe Morgan
    , contributor
    Comments (1608) | Send Message
    The data that points 9.5% growth is REAL GDP GROWTH....


    Nominal GDP growth is around 16%.....
    16 Jul 2011, 08:53 PM Reply Like
  • Windsun33
    , contributor
    Comments (4431) | Send Message
    If I sell a toy monkey in 2010 for $100, and sell the same one in 2011 for $110, then Inflaton on toy monkeys went up 10%, and that same toy monkey also added an extra 10% to toy monkeys' contribution to GDP.


    Toy monkeys went up, GDP went up, what's not to like? (unless you are the purchaser of toy monkeys).


    The problem here is figuring out how much - if any - adjustment to the inflation adjusted GDP you make for the $10 increase in toy monkey prices. What caused the increase? Why should it or should it not be adjusted? What if the price goes up to $120 next year - does that adjustment include the previous price rise?


    In short, I don't trust China's official figures very much.
    16 Jul 2011, 09:30 PM Reply Like
  • American in Paris
    , contributor
    Comments (5495) | Send Message
    What is hilarious is that you take Chinese economic statistics at face value.


    And that you cannot recognize an asset bubble after living through the dot-com era and the US real estate disaster.
    17 Jul 2011, 10:59 AM Reply Like
  • golfitobob
    , contributor
    Comments (2346) | Send Message
    subtract the US growth from real inflation and it's time to hand over the keys to 80% of US homes to the Chinese.......... Then drop the minimum wage an meet the new coolies....... I left the US..


    Smart me.......... Go China boooo Obamaville
    16 Jul 2011, 12:41 PM Reply Like
  • Daniel M. Harrison
    , contributor
    Comments (139) | Send Message
    There will be a crash at some point, but we are still some way from there yet. Right now, what's happening is that instead of being (re)invested in the domestic economy, a lot of private wealth in HK and south China is being redirected to the South East Asian corridor: places such as Thailand, Malaysia and Indonesia are all reporting an uptick in FDI, and much of this is Chinese. The relationship between the Chinese and SEA economies is still, remarkably, examined only casually, but there is in fact a strong and direct one there.


    The upshot is that Chinese asset prices might deflate a little here and there for the next few years, but while its SEAn back yard is still there to keep pumping it full of raw materials and consuming and growing its speculative layers of capital, there won't be any real crash, at least not in the sense of the Wall Street crash 2008. That will only happen once the tiger cubs overheat: and then the world over will hear it tumbling.


    The premise of the article - that this will negatively impact western markets - is wrong however. It will be for western markets exactly what the crash in the west was for the east: a chance to pick up the little quality that remains for bargain-basement prices and recruit the brightest and best that can no longer find work eastside.
    16 Jul 2011, 03:15 PM Reply Like
  • Tom Au, CFA
    , contributor
    Comments (6879) | Send Message
    In 1931, it was the crash of GERMANY (then the world's second ranking economic power) that turned a recession into a decade-long (and global) depression.
    16 Jul 2011, 03:22 PM Reply Like
  • Duude
    , contributor
    Comments (3413) | Send Message
    China can go almost indefinitely without a crash. Why? Because they control the news distributed. We've already seen how easy it is to gouge foreign investors with no ramifications. Frankly, I don't even buy their 8-9% growth projections. How could they maintain that in the depth of a deep world recession in 2009? Even their treasury purchases were made with newly printed Yuan. They make the rules, enforce what they want and report the results. Yeah, no conflict of interest there.
    16 Jul 2011, 04:55 PM Reply Like
  • Daniel M. Harrison
    , contributor
    Comments (139) | Send Message
    A good example of this is the AH share premium, where mainland-listed stocks are trading 25%, and in some cases 50% and above, the value of their dual-listed shares in Hong Kong. If the A-shares became free-trading, then the premium would evaporate. In other words, more than a quarter of corporate China's public-listed companies are trading at least a quarter above their internationally-recogn... valuations.


    Amazingly however, there are still plenty of foreign buyers willing to buy all sorts of derivatives linked to the AH share premium index. The problem is that the return-model on the AH share premium index works much like the return model on a ponzi scheme: it's constantly on the up (more or less) until the air comes out of it.


    If the government is willing to play these kinds of ponzi-scheme style games with the valuations of the country's private assets, it's more than likely that it is willing to do so with its own.
    16 Jul 2011, 05:59 PM Reply Like
  • Windsun33
    , contributor
    Comments (4431) | Send Message
    I am convinced that it is just a matter of time before some crashes happen in China, especially in the hugely overpriced real estate sector.


    Thing is, we may never know about it - it is after all, a Communist dictatorship with a very large stake in saving (financial) face.


    And that is a problem with China, you very often don't know what you are really getting. In fact you may not be getting anything at all.
    16 Jul 2011, 08:12 PM Reply Like
  • Asymmetrical Tech Investor
    , contributor
    Comments (189) | Send Message
    I think the plan is to let them own as much of our debt as they want, then freeze any assets they have here and default on the Chinese debt only citing economic warfare. Paybacks.


    Use part of the gains to address any damages to US investors in China. Tell them to sell their garbage elsewhere and ban imports.


    Seeming draconian moves but in the new era of warfare. the most likely scenario given their outright hostility, continual espionage, theft of intellectual property, human rights violations.They despise us and already at war with us . At some point, it will make sense given the direction things are headed.
    17 Jul 2011, 08:09 AM Reply Like
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