JWG

Don't Bet Against Chinese Demand Growth Just Yet

Lane,

I'm a Jane Jacobs fan too, and I think your application of her logic is correct, at least if you view things on a sufficiently long time scale.

However, IMHO you sound a bit too much as if you believe that there is no business cycle in China. There surely is. I expect that, like usual, it will feature financial busts -- more than usually spectacular, given the scale of everything in China -- followed by huge and ham-handed government interventions, which imply slow and long drawn out recoveries. Michael Pettis offers some reasons to believe that the Chinese financial system is in more than the usual amount of trouble right now.


Also, just as happened repeatedly in the US in the 1800's, foreign investors will frequently get thoroughly screwed. When things get messy, the government has to step in, and that means allocating pain and bail-out money. That's inherently political, and you don't want to be a fully invested foreigner just then.

Investing is never easy. Everything you say about China could have been said about the US in September 1929. But one would have waited a long time to break even if one bought just then -- forever, in the case of many individual issues.

Jim G