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It's no surprise that most investors now see China's growth slowing substantially, to less than...

It's no surprise that most investors now see China's growth slowing substantially, to less than 5% a year by 2016. Sure, but it will be a softer landing than most expect, Stephen Roach says. Urban migration will soak up more housing than forecast, and the government is responding forcefully on inflation. "Strategic transition is what modern China is all about."
Comments (20)
  • Angel Martin
    , contributor
    Comments (1309) | Send Message
     
    the "experts" always predict a soft landing, and never see the crash...
    1 Oct 2011, 08:22 AM Reply Like
  • Tack
    , contributor
    Comments (13401) | Send Message
     
    And, the pessimists always forecast calamity in everything and see the upside of nothing.

     

    Take your pick.
    1 Oct 2011, 08:31 AM Reply Like
  • Angel Martin
    , contributor
    Comments (1309) | Send Message
     
    agreed, and i don't follow the permabears either
    1 Oct 2011, 08:35 AM Reply Like
  • pdlobo
    , contributor
    Comments (85) | Send Message
     
    "come on jimmy its a sure thing" ANGEL!!!!
    1 Oct 2011, 08:41 AM Reply Like
  • vtorch
    , contributor
    Comments (288) | Send Message
     
    Despite official figures, growth in China will not be in a straight line, and growth will eventually slow. It has to. But with a GDP per capita of US$7,000, literally no social security, I just don't buy the idea of a below 5% growth over the next five years.

     

    Remember, it was only 60 years ago where China nationalize the entire country, and probably 20-30 years ago where capitalism kicked-in i.e., from a personal standpoint, economic development is only at its infancy, and real entrepreneurship is only starting to kick in.
    1 Oct 2011, 09:09 AM Reply Like
  • Papaswamp
    , contributor
    Comments (2198) | Send Message
     
    Urban banks have taken on huge loans. With western demand for goods dropping, I'm not the 'urban migration' is going to be as brisk as previously thought. Why move from a rural area where the govt can't keep as close an eye on you to an urban one where they can?

     

    Longer term...
    China is also going to be facing a demographics issue. Heavy population control along with a heavy emphasis on males, has left China with a big population gap coming plus a large aging group (much larger than baby boomer generation).
    1 Oct 2011, 08:34 AM Reply Like
  • vtorch
    , contributor
    Comments (288) | Send Message
     
    Urban migration is slowing, but not for the reasons you mentioned. The main reason is that people are getting better quality of life and are less willing to move outside their home town for work. Factories often have a tough time getting the workers back after Chinese New Year, and have to increase wages to attract sufficient workers.

     

    Western demand for goods isn't dropping - it is just not growing. And part of the reason is because it is more and more expensive to manufacture in China, and there's no real alternative. The US government has been touting for the appreciation of the CNY, an idea which I personally hate, because I don't enjoying paying more for goods, and I don't see any real alternatives in large scale manufacturing other than China (no, I'm not a believer in India's manufacturing sector). One good test is the prices of clothing, which has been decreasing in real terms over the past few decades. Today, despite slowing demand, prices of clothing is still increasing, because there isn't any other locations that clothing manufacturers can move to (and replace China entirely).

     

    China's population control was because there just isn't sufficient resources to support uncontrolled population growth. If you take India's population growth rate over the past 60 years and apply to China, China would have 300 million more people, which is the population of the US (third most populous country in the world).

     

    China has been trying to promote internal consumption vs. exports for economic growth. I just hate to see how expensive things will get if that really catches on.
    1 Oct 2011, 08:57 AM Reply Like
  • Papaswamp
    , contributor
    Comments (2198) | Send Message
     
    What about the banking situation…massive loans..alot of debt. Even hearing reports of Japanese equipment manufactures having a hard time getting paid.

     

    Demand does seem to be dropping as I see dropping demand for stainless, copper, iron, etc.
    http://bit.ly/rgFikK

     

    I understand the reasoning behind the population controls…it's the later impact of such controls. +20% male to female imbalance puts China in a dangerous place….men without spouses tend to have idol time on their hands and higher aggression. Demographic imbalances such as these tend to result in violent rebalances.
    1 Oct 2011, 09:29 AM Reply Like
  • vtorch
    , contributor
    Comments (288) | Send Message
     
    I don't know about the Japanese equipment manufacturer situation so I can't comment. Seemed strange that the Japanese couldn't collect their receivables from their customers because the Chinese banks are laden with debt. Perhaps they should have done better credit analysis of their customers.

     

    Copper and steel are mainly used in the real estate and automotive sectors. Earlier in the year, although the Chinese government took measures to clamp down on real estate development, developers didn't take it seriously. Some of them even resorted to private "trusts" that charge 25% annual interest to fund their development. And they thought the Chinese government's efforts will be similar to that of the Hong Kong government - toothless against developers. Well, they were wrong. Hence real estate development has slowed down significantly. The automotive segment faced similar clamp downs as the government combat traffic congestion.

     

    As a sample check, I would look at prices of foods, basic necessities and even luxury items (e.g., diamonds), all of which continue its upward trajectory in China.

     

    Population imbalance is probably even more profound than what you said because rich Chinese men have many women, and poor Chinese men have none. Unfortunate but a reality.
    1 Oct 2011, 12:01 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (543) | Send Message
     
    Roach on China back in May. I think it's fair to say he's a believer.

     

    http://seekingalpha.co...

     

    Chinese shares off 30% since then. Maybe more importantly, the industrial commodities of which that country was the marginal bid, are finding themselves without a buyer. Brazil is paying attention. Australia is about to. Mr. Roach?
    1 Oct 2011, 09:00 AM Reply Like
  • Angel Martin
    , contributor
    Comments (1309) | Send Message
     
    Good find !
    1 Oct 2011, 09:06 AM Reply Like
  • vtorch
    , contributor
    Comments (288) | Send Message
     
    Economic reality and stock prices have no correlation in the near term. Not in the US, and not in China.

     

    The depression in Chinese stock prices is because investors (all domestic because it is restricted) have no confidence in the stock market. The man on the street in China feels that the stock market is rigged, and would rather own real estate and real assets (e.g., gold, and even diamonds, although I personally feel that diamonds are rigged). Real estate prices have held up decently well despite new onerous regulations, basically preventing people from investing into the sector (you can only purchase one property for your own use).
    1 Oct 2011, 09:22 AM Reply Like
  • Papaswamp
    , contributor
    Comments (2198) | Send Message
     
    they get kudos for thinking the market is rigged….hopefully that will dawn on most in the US….though probably not until too late.
    1 Oct 2011, 10:16 AM Reply Like
  • Hendershott
    , contributor
    Comments (1558) | Send Message
     
    The man on the street has the same feeling about the US stock market, correctly.
    1 Oct 2011, 09:57 AM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    "Strategic transition is what modern China is all about."

     

    It would be more truthful if the words "Government forced" were added to the beginning of this sentence. In most cases the Chinese people do not have a choice because of the Chinese governments unencumbered interpretation of "eminent domain"
    1 Oct 2011, 11:49 AM Reply Like
  • Jackson999
    , contributor
    Comments (468) | Send Message
     
    "Urban migration will soak up more housing than forecast,..."
    -----------
    China wants its urban migrants to leave their children at home with others while they come to the urban cities to work. But of course, parents aren't happy doing this, so they have been bringing their children with them. Lately, the Chinese authorities have taken to bulldozing buildings that are being used as schools for the children of migrant workers in order to force the parents to send the kids back home.

     

    This doesn't sound like the root of a policy that will encourage migrants to want to work in the cities.
    ===========
    Beijing demolishes migrant workers' schools
    Source: Toronto Star | Bill Schiller

     

    Until recently, 11-year-old Shen Mingcong was a happy-go-lucky Grade 4 student at the aptly named New Hope Experimental School here.

     

    But on Wednesday, she stood silently and watched as trucks carted away the bricks of what was once her school -- together with her youthful memories.

     

    "As you can see it's all demolished now," she said shyly. "It looks like I'll have to go back to my hometown.

     

    "I really don't want to," said Shen, a slight, pretty girl wearing a t-shirt adorned with a wide-eyed cartoon character. "Who wants to live away from your parents?"

     

    But Shen and tens of thousands of other children of Chinese migrant workers in Beijing are being driven out of the city in a campaign launched by local authorities to close down independent schools that have sprouted up to provide the children the education denied them by the state.

     

    ....

     

    http://bit.ly/qlWjwL
    1 Oct 2011, 02:09 PM Reply Like
  • Hendershott
    , contributor
    Comments (1558) | Send Message
     
    It's not exactly the land of the free.
    1 Oct 2011, 04:41 PM Reply Like
  • twice
    , contributor
    Comments (89) | Send Message
     
    The Chinese are not serious about inflation. They have printed way more money than the US, and it is not even close. Right now interest rates there are still way too low.
    1 Oct 2011, 06:55 PM Reply Like
  • Hendershott
    , contributor
    Comments (1558) | Send Message
     
    The Chinese leadership has different priorities than the West. They are trying to keep the population happy so they don't overthrow the government. China has a long history of that happening. In fact that's how the present leadership came to power. Some inflation is not unwelcome, wages in particular. Some is not, real estate in particular, since it prices the proletariat out of the market, or food, because higher food prices upsets the population. The leadership is trying to make the Chinese economy self sustaining but in the meantime it's an export based economy and higher interest rates would be counterproductive. It is still a command economy, planned by the central committee with 5 year plans etc. State sponsored capitalism but politically still a communist government. Most of the leadership are trained engineers, not beauracrats, so they tend to be quite practical with their planning. Their best model of what not to do is Japan. Don't let the currency float, don't allow a real estate bubble and don't let wages stagnate. The goal is a "harmonious society", a term the leadership uses a lot. Historically in China, the government stays in power by keeping the population happy and they have a very long history.
    1 Oct 2011, 09:04 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    Econdoc!
    1 Oct 2011, 09:48 PM Reply Like
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