M.R. Henderson

China: Will Rising Unemployment Cause Policy Missteps?

If those export rebates were instead domestic sales rebates to drop prices, the Chinese would do the rest; trucking that stuff out to the provinces and selling it to all those young people hungry for purchases (and they are hungry all across China); and with this rebate a one time deal, the young might well ask mom and dad, and fill those new apartments with all the gizmos they see in "Desperate Housewives", stop worrying so much about property and stocks. Might calm the property market, to get people invested in their home, not looking to flip it.

China’s Manufacturing Crisis: The Real Story

Everyone talks about Chinese savings, but the tragedy may be where they saved: what happens when it becomes apparent that the "banks" have invested this money in bust property schemes?


On Nov 07 09:28 AM www.rapidtrends.com/bl.../ wrote:

> Difference between China and USA from a consumer perspective is acutally
> quite huge. Chinese citizens have shown a respectable 40%+ savings
> rate, whereas US Citizens spend more than we make with a negative
> savings rate of around -2.5%.
>
> This alone is a massive difference.
>
> Weathering a storm while one has reserves built up is very different
> than entering a storm without anything to fall back on, worse, being
> the largest debtor nation in the world.
>

China’s $585 Billion Renovation

On WCC: I would want to know over the past few years what percentage of WCC sales have been to infrastructure projects before I considered cement after the last eight years of booming cement. Will infrastructure increases make up for the declines in property and manufacturing? Fixed asset investment in China 2007: 24% property investment, 30% manufacturing, 30% infrastructure. What companies beside Microsoft are increasing their investment in China? Apartment sales are slowing as prices are falling; how deep this goes remains to be seen, but few are brazen enough to be starting new property projects. And there has been a lot of building here. A Bank of China manager gave us a tour of an empty skyscrapers built just to improve property values. He said this has been done all through China to help prices. What would happen if these building managers started renting space on the sly?

As for a railway service provider from Guandong? That's the area hit hardest by the manufacturing slowdown so far. After this company is done shipping all the workers home, they aren't gonna be carrying more freight than they did last year. And with newly launched competition?

The last company mostly builds railroads. I invested in them after the Nigeria contract came up for renegociation, but this new developement that Beijing wants already strapped local governments to pay 3/4 of the BOLD infrastructure stimulus makes me worry that instead of helping a railroad builder, this package could saddle them with more debt.

From the FT: Beijing offers just quarter of stimulus funds
By Geoff Dyer in Beijing
Published: November 14 2008 23:35

Mu Hong, vice-chairman of the National Development and Reform Commission, a government economic planning agency, said Beijing would increase spending by Rmb1,180bn ($172bn, €136bn, £116bn) over the next two years – leaving local governments, state-owned banks and companies to provide the rest of the new funds.

If there's a way to create problems with the rapid ramp up of this "stimulus", I would say Beijing found it.

China Med Wins Approval for Breast Cancer Probe

Is CMED also listed in China?

The Next Great Asian Bull

"Western" news coverage of China is fine so long as it does not come from Murdoch, now including the Wall Street Journal. Wait until the October and November numbers are traipsed out to see how much they affect the FXI. Anyway, this article is about charting, not news, and I have a question for the author. According to your charts, why do you find a bottom for the Shanghai at around 1600? Why not a bottoming around 1000?

The Next Great Asian Bull

Try charting the news stories that headline an acceleration in declining imports and exports and retail consumption, along with growing unrest among a population not accustomed to its income contracting, and shorting the Chinese market emerges as the only rational decision at this juncture.

Is China's RMB 4 Trillion Fiscal Package Losing Steam?

Alex:

I agree concerning banks. The problem with loans to farmers wouldn't be that farmers are uneducated or that they would become furious at anyone who made money (sounds like the 1980's?), it would be the bank officers' lack of education in actual loaning. Arguing this tonight with the son of a Beijing government official, he went on to say that the government was giving the farmer's extra money for their crops to spur domestic consumption of products like cellphones, refrigerators, tv's, which would no longer be exported or bought by new apartment owners.

Five Key Quotes from Home Inns on China's Outlook

Those quotes were supposed to be good news? While occupancy has begun going down, we believe we will be self-funding by 2010??? Looks like budget hotels are possibly following the five-stars down. The one bright spot is that medium sized businesses might be getting more loans. After the Wallstreet journal article headlining "China's Stimulus Will Work", which looked like it was written by someone from the China Daily, this kind of "optimistic" talk doesn't make me confident.

Is China's RMB 4 Trillion Fiscal Package Losing Steam?

China's stimulus package is a simple calculation that a one-off rolling forward of rail, highway and other infrastructure build-out will soak up much of the lost jobs it is seeing in its export fall-off. It is a band-aid, and I agree that this kind of stimulus worked well after the asian economic crisis of 1998 especially because much of what was built then fueled the export industry's growth going into a global credit expansion. This time around such a stimulus will merely provide temporary jobs for migrant workers while laying structure for an export industry that will not soon accelerate growth. What would be a game changer would be to give the push that governments stimulus can give toward a tendency already there, to tip the Chinese consumer into full buying. What would make me sell my FXP and buy FXI would be to see the creation of fast-track individual loans for 3rd and 4rth tier cities and rural areas. The current package pays lip-service to encouraging Chinese consumers, but it only provides small encouragement to buy apartments, which have been in a bubble (as most Chinese with money know). In discussing buying an apartment now, some Chinese have incorporated the phrase "catching a falling knife": and 20% instead of 30% down on house loans, .5% reduction in first time buyers tax, is not enough to encourage people to buy in a deflationary environment. Many of the world-savvy Chinese are actually expecting what has played out in America to play out here. I, more pessimistically, see more in common with America in 1929 here. Possibly, as the crisis deepens, concrete consumer spending incentive measures will be announced. However, once people are scared not just by what they surmise, but by what they actually see happening, such measures may not work. Already there is brewing mistrust and pessimism. This weekend a friend told me that after it bails out the banks, which is quietly happening now, China's government will probably still have $900b to spend. Put in the hands of consumers while yoking them to government banks, their jobs, and China's future, would not be the worst plan, but it might take an Obama of new ideas, not something the conservative leaders are likely to conceive, when, as a racist government friend told me, Chinese people are not smart enough to trust them with either democracy or money. Of course that is ridiculous, but it is one of those government phrases heard too often. I also suspect that informal lending is contracting, from what I hear among Chinese friends, and so I advocate a move into consumer loans by China's banks (as an aside this would be a great way to get ahead of the foreign banks slated to come in after 2010). For those who don't know, from official banks it is still next to impossible to get small business loans, and that was when things were good. Other measures to stimulate consumer purchases could address the beleaguered export factories. There are little to no incentive packages for exporters to turn around and sell their high quality items at a discount domestically - often it is even illegal under Chinese law - however Chinese would love to be able to buy the legendary items produced only for export. The Chinese youth are not the savers their parents were, indeed many of them borrow from their parents to fuel their consumption. So while I don't think it would take much, it seems a chance to tip the Chinese economy toward a consumer consumption boom has - so far - been lost. That said, the Chinese probably need less than the world thinks to go on an American-style spending spree. It would not take much to encourage them to spend, and possibly the government, knowing this, is hesitant to encourage them. Anyway, that's something that's been on my mind - but i diverge...