chennian

Chinese Exports: Can Emerging Markets Replace the U.S. Consumer?

but you have to note the fact that for every dollar exported to U.S., China only gets about 6 cents. For exports to EM, it could be the other way around. That is a huge difference.


On Nov 13 05:55 PM dw57 wrote:

> I think you over looked that its easy to grow some thing fast if
> its small. but its a lot harder to grow some thing if its really
> large.
> I.E. that 40% growth in EM, maybe relate to 5% growth in US or EU
> growth. or less
>
> On Nov 13 05:45 PM HaavBline wrote:

China's Economy: All GDP Is Not Created Equal

Your data might be true, but they might be ten years old. This year to date, almost 10 million automobiles have been sold in China. Most of them are more than 50% more expensive than those sold in U.S. And most importantly more than 90% of them were sold on full payment of cash.


On Oct 26 11:11 PM doubleshortetf wrote:

> How can a country where 83% or little over a billion people live
> with income less than $2,000 be heading to middle class?
>
> Some sober data on China for investor (speculators) fascinated with
> China - 3rd world country ruled by 1 party - communist. Similar to
> the adoration US had for Japan 20 yrs ago right before the mother
> of all Japanese bear markets starting in 1989.
>
> China would have to triple the size of its economy - and the US would
> have to stand still - if China were to pull even with the US in GDP.
>
>
> Consider the following numbers, culled from official Chinese statistics:
>
>
> 1. About 65 million or 5% Chinese people live in households with
> more than $20,000 a year in income.
> 2. Around 165 million or 13% make between $2,000 and $20,000 a year.
>
> 3. About 400 million or 31% Chinese have household ­incomes between
> $1,000 and $2,000 a year.
> 4. About 670 or 52% million have household incomes of less than $1,000
> a year.
>
> As you see China is a land of extra­ordinary poverty.
>
> And some dreamers to think that China can pull US and the world out
> of financial rut...

Buffett Sees 'Enormous' Economic Progress over Last Year

What enormous progresses, to name a few?

U.S. Subprime RMBS Delinquencies Hit 50% for Some Vintages

Green shoots?

Where Are U.S. Dollar and Yuan Really Heading?

I think Americans can't ask Chinese to do two things at the same time, to appreciate Chinese currency and to hold on to U.S. debts. Maybe this is what American are trying to achieve. But what the Chinese wants to do is to offload the U.S. debts before allowing the currency to appreciate.

Chinese Numbers Are Starting to Look as Skewed as Ours

There is a big mistake about the size of China's economy, especially the size of China's service industry.

China: Is Retail Growth a Proxy for Consumption Growth?

Do you live in Shanghai? Do you see 50% discounts in Shanghai's stores by your own eyes? Unbelievable people!

If you wish that Chinese economy will collapse soon, just go on and dream about it.


On Sep 14 12:00 PM James Lewis wrote:

> I have two comments on the retail figures:
>
> 1. Warehouse storage costs are at an all-time high in Shanghai, I
> have been told by many people its a great business to be in at the
> moment. Factories do not house goods in private warehouse storage
> centres. Retail distributors do.
>
> 2. Shanghai has experienced unbelievable discounted sales, 50% has
> been very common in the sales. These sales have been running for
> the past 3-4 months. From my calculations, I believe that a lot of
> these shops are selling below their cost price. I also believe that
> they would not be doing this unless the low selling price was being
> subsidised.
>
> The retail sales picture in most sectors is a complete mirage. However
> consumption does seem to be very strong in decoration industries
> in Shanghai as a result of the strong property market. From where
> I am standing the only true policy that seems to be making a real
> as apposed to control difference is in the strengthening of the asset
> markets.
>
> Not a bad way to create a wealth effect and improve consumption in
> the higher middle/higher classes. Shame the middle/higher middle
> class only represent about 10% of the population.
>
> On the issue of trade protection, you have been on the ball Michael.
>
> Maybe world trade needs to contract for the participants to move
> past their tunnel vision.

The Shanghai Market Calls the Tune

I generally agree with you on that when government takes on the liability, it nurtures future bad behaviors. But it might be very much different for China's SOE. Because the government can explicitly order a stop on SOE's derivatives trading. It actually did. If you were the trader for those SOE, you would be out of job.


On Sep 04 12:41 PM James Lewis wrote:

> Michael, have you been picking up on Chinese SOE's plan to cancel
> derivatives contracts with the Western Banks because they are so
> underwater. This is what sent shockwaves through the market recently
> both from the angle of the state of the SOE's, but also putting the
> whole financial market framework under risk. It poses the question
> if the SOE's can refuse to honour derivative contracts (backed up
> by the central government), then is there any stability in the market
> framework.
>
> Liu Xinhua comment about stability etc i feel was also aimed at re-assuring
> everyone around these issue of cancelling the contracts.
> It is very obvious that the losses taken on these contracts are truly
> huge. In fact I dare to say so huge that many of the SOE were insolvent
> when the commodity markets were trading lower at the start of this
> year. I dare say this had something to do with the SOE's taking on
> huge speculative inventory in order to push the spot price up (which
> had the dual effect of making spot price more in line with futures
> price - ie reducing the spread and also making their massively leveraged
> derivative positons less damaging)
>
> This incident also brings to light that budget sheets on the Chinese
> companies/banks were (maybe are) probably no better that their western
> counterparts. Which is quite a scary thought...
>
> The governments response shows once again that in effect the Chinese
> government is now implicitly/explicitly guarantor for everything
> stupid the Banks/SOE's do as well as the markets. The market is in
> effect a symbolic mirror, of 'Daddy is rich, he'll get me out of
> trouble if I do anything naughty'. And this can only lead to a corporate
> culture of gambling and corruption, I wish I was a high level trader
> for one of the protected instiutions. This can only lead to bad investments
> and huge write offs. It is no different to making State Banks lend
> to unprofitable SOE's for political/employment reasons and this destroyed
> the banking sector in China at least twice. Chinese Rogue
>
> When I think about things I recall I use to believe the government
> very much wanted the stockmarket to go up to create a wealth effect
> to stimulate domestic demand and that was part of their tool box.
> Now I believe that in fact the government wants the stockmarket to
> entice the chinese savers to move their money out of savings in order
> to allocate capital to their 'strategic corporations'. The best way
> to do this is close off flows going out of the country, then creating
> asset bubbles to entice savers money into the market which is then
> used to buy overvalued stock of their 'strategic corporations' during
> the distribution phase. Anyone that has seen the huge amount of stock
> coming into the market shortly because of lock-up expiration will
> be able to connect exactly why the market is being talked up by the
> government.
>
> This is all being done on the premise that asset price bubbles in
> China are fine because if they keep all flows from leaving China
> then all that is happening is money is being lost by some and distributed
> to others. We all know who the winners are and the losers are. Of
> course this is not true, because there is always an element of karma
> in economics.
>
> When this gigantic distribution is finished, confidence among the
> people can only go lower. Once again a lot of money will be lost
> by the masses. So in the medium term without large increase in wages,
> consumption can not go higher.
>
> I hope everyday that China can truly reform to the better of its
> people and the evolution of the prosperity of the world. But it seems
> the current aging generation is motivated by power, wealth and keeping
> their cronies rich at the expense of the masses. This is not congruent
> with increasing domestic demand and I am slowly but surely losing
> hope that things can change in the short term.
>

Debunking the China Growth Myth

China has many problems, but China has one hope. Consumers in China is spending and they have money. Wake up guys, China will be the biggest automoblie market in the world this year and the biggest air travel market in the world this year. Consumption only accounts for less than 40% of GDP, but it is growing at more than 15% per year. Chinese government is just buying time to get to the point that domestic consumption can make up the gap left by falling exports. At the meantime, Chinese government is trying hard to avoid any side effects may be incurred by lending explosion.

The Second Reason Consumers Aren't Spending

I like your insights, but I hate your comments about the Chinese conspiracy to have different chargers for different eleoctronics.

Several years ago, Chinese government started an initiative to standardize chargers for mobile phones. You guess who teamed up against it and finally make the initiative fail. Nokia, Motorola and Samsung.

It seems to be fashionable to blame Chinese on everything. It is typically Westen.

Is China the Next Great Bubble?

Many people think that export accounts for 37% of China's GDP. So when U.S. collapses, China will follow. But the truth is about 60% of China's export is based on processing imported materials. So when the export shrinks, so does the import. Much different from what the numbers tells us superficially, domestic consumption and investment makes up more than three fourths of the economy.

The value addition from exports accounts for a very small portion of the country's. It does affect a lot of people, because the export industry employed millions of workers. But their unemployment will not affect the domestic consumption too much. Rural migrant workers lags urban residents more than ten years in terms of spending (this worries many people in good times, but not in bad times)

Chinese government did set up huge infrastructure projects and encouraged banks to starting lending. But if you thinks the huge increase in China's bank loans is irresponsible, you are terribly wrong. The Chinese banks are annoyingly risk averse. I personally have 2 millions USD worth of home equity. I tried four months to secure a loan of 200k USD for my small business, but I failed. In China, you cannot borrow money against your house to buy cars, stocks, big screen TV, to take a vacation, to start up companies. All Chinese loan insurance companies will ask for collateral to help you get a loan.

Chinese did introduce some incentive programs to boost consumption and these programs started to deliver some results. But up till now, all the incentive programs are designed for low income people. In 1997, Shanghai successfully launched an incentive program which dragged the city out of a deep housing market slump caused by Asian financial crisis.

Unlike Americans, most Chinese live on surplus month by month. If they want to, it will not create any financial problems to them to increase their consumptions by ten or twenty percent.

The car prices in China are 50% to 200% more expensive than those in U.S. So are the insurance and gas. All those are either controlled and can be substantially imfluenced by the goverment. If the government can convince people that there is a bargain, then people will spend.

So don't worry about China. Worry about U.S. China is trapped by U.S. in treasury bills. China believes the ultimate devaluation of dollar and thus hyperinflation are inevitable. You can notice that China is gradually withdrawing from U.S. T bonds and buying commodities, both domestically and abroad. Buying domestically will help to smooth out the process of reducing overcapacity. Buying abroad will tranfer dollar devaluation risks to other countries and moreover help them to recover. In the future when hyperinflation comes, China will be able to protect itself and maybe make some fortune.

Stiglitz: PPIP Assets = Call Options

I read an article about how PPIP will work, but I can't understand how. It seems to me that it is just a scheme that the government is responsible for all the cost and losses, but pretends the private sector helps to shoulder some of them.

China, Energy and Banks: Obama Courting Disaster

The truth is the U. S. has to live on bubbles, otherwise the economy will collapse. Chinese mercantilism and Wall Street abuses are just right there to help to boost the bubbles. They don't cause the crisis. The root of the crisis is that the party should long be over, but people don't want that to happen.

Is This (Finally) the Bottom? Part II

Old style economics doesn't fit in here. It is not the banks that were lending. It is the foreigners. The problem is, are they frightened? Why did Bernanke have to buy treasury bonds? Because foreigners are frightened. So forget about V shaped recovery.

Bernanke: Sees Recession Ending This Year

Bernake has been smoking a lot since 2007. Smoking is hashardous to health, please remember.