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Bad news for Modi-baiters: Not China, India to be world’s fastest growing economy in 2017

Discussion in 'World Economy' started by Ankit Kumar 001, Jan 17, 2017.

  1. Ankit Kumar 001

    Ankit Kumar 001 Major Technical Analyst

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    By: Rajeev Kumar | New Delhi | Updated: January 17, 2017 4:17 PM

    International Monetary Fund’s latest World Economic Outlook update slashing India’s growth prospects for 2016 by one percentage point has provided the Congress party and other Modi-baiters with another opportunity to attack the NDA government in Centre. In a series of tweets following the release of IMF report on Monday, the Congress claimed former Prime Minister Manmohan Singh had already warned of a slump in the economy in the beginning of demonetisation exercise announced by Prime Minister Narendra Modi on November 8, 2016.
    “Dr. Manmohan Singh warned against the drop in the beginning of demonetization. The ego of an individual has pushed billion ppl into trouble!,” the Indian National Congress tweeted. The party even accused Modi government of pushing India backwards on the line of government in Pakistan.
    Overview of World Economic Outlook projections.
    However, the party appears to have not read the details of the report in depth. As the party has already used IMF report to attack the government, here’s something that may force Congress vice-president Rahul Gandhi, Manmohan Singh and other opposition leaders to recalibrate their strategy against Modi.

    Owing to “the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative, the IMF has slashed India’s forecast for 2016 from 7.6 to 6.6%. The forecast for 2017 has also been slightly reduced by 0.4%.

    However, despite the “negative” IMF forecast for 2016 and 2017, as claimed by the critics of demonetisation, India would continue to grow faster than China in 2017 and 2018 by huge margins. For the year 2016, IMF has estimated growth in China to be at 6.7%, which is just 0.1% higher than India’s 6.6.

    If the forecast is to be believed, Indian economy would take a big leap in the next two years. In 2017, India would grow at 7.2% and at 7.7% in 2018. In contrast, China would grow at 6.5% and 6.0% in the respective .

    The possibility of India growing more than the IMF forecast is also high. The report has mentioned that current trimming of India’s growth forecast is because of the “negative consumption”. However, with so much money available with banks after demonetisation and expected sops to be announced by Finance Minister Arun Jaitley in the upcoming Union Budget 2017, consumption pattern may grow faster than what have been estimated by the IMF for the forecast. Earlier, World Bank had also predicted healthy growth of Indian Economy in the years 2017 and 2018.
    The next General Elections are scheduled for 2019. In the words of Bihar Chief Minister Nitish Kumar, PM Modi would be “riding an elephant” if IMF forecast becomes true.

    http://www.financialexpress.com/eco...growing-economy-in-2017-2018-says-imf/511107/
     
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  2. Ripcord322

    Ripcord322 Lieutenant FULL MEMBER

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    Oh dear......Not This Again...
    I know we are growing at a fast pace....
    It's Good....We should be happy....



    But Comparing China and India at this point is Completely Foolish....


    China's Economy was 2 Trillion in 2004 and by 2014 They were a 10 Trillion Economy (i.e 5 Times in 10 Years)....If we really want to compare ourselves against China then we will have to repeat what they did...i.e Grow by 5 Times in a span of 10 Years...(We are a 2 tn. Economy now...)
    i.e We would have repeated the 'Chinese Miracle' iff We become a 10 Trillion Economy by 2025-2026...
    Which Even by the Government's Admission isn't Possible....We wouldn't be a 10 Trillion Economy even by 2030....


    In their Prime They had growth Rates of 12-14%....


    The fact that they are still growing in '6's' means they are growing tremendously....
    There is No point in Comparing Growth of China NOW and India NOW....
    China's Economy has matured a lot...and it's still growing btw...


    When People Compare India's Growth rate Now To China's Growth Rate now...They are just embarrassing themselves...To be Frank...It's Very lame...
    I am fed up of these delusional comparisons....





    Yes We are growing.....But India and China Can't be Compared....China is fundamentally different from us...They are waay out of our league....Let's just compete with ourselves....Please...Their Economy is at a completely different Stage....They are showing signs of maturing...Our's is still relatively young....

    PS : 6.7 % of 10 Trillion is still Waaaaaaaaaaaaaaaaaaaay more than 7.6/6.6 % of 2 Trillion...In real terms...They add much more to their Economy per year than what we do....

    If we won't achieve growths of 12-14 % like China Did in it's prime....There is really no point in comparing.....
     
    Last edited: Jan 17, 2017
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  3. Indx TechStyle

    Indx TechStyle Lieutenant FULL MEMBER

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    The Other Side of the Chinese Economic Miracle
    By Deepanshu Mohan on 21/12/2016
    Over the last three decades, under China’s infrastructure-led public investment boom, total aggregate debt has grown from $2.1 trillion to $28.2 trillion.
    [​IMG]
    Shanghai. Credit: whiz-ka/Flickr CC BY 2.0

    David Graeber, an economic anthropologist, in his book Debt: The First 5000 years says, “One has to pay for one’s debts”. But there is one taboo of economics that the government is hiding from the public, Graeber argues – the fact that if the government balances its books, it becomes impossible for the private sector to do the same. This inevitable debt, he claims, often lands on those least able to repay it in a society.

    Graeber’s fascinating historical account explains how the creation of debt remains vitally linked with the demand and creation of money (from barter to paper in all its forms). To understand debt, one needs to understand the history and creation of different mediums of exchange within the economy as an important tool to explain how swelling levels of debt emerge. Perhaps China, with its recent history of accumulating a ‘great wall’ of debt, may learn a lesson or two from Graeber’s own work.

    Since 2000, China’s debt in terms of debt to GDP ratio has grown up to 280-290% (approximately), which exceeds the debt levels of highly-indebted developed countries, including the US (269%) and Germany (258%), and emerging countries like Brazil (160%) and India (135%). Over the last three decades, under China’s infrastructure-led public investment boom, the total aggregate debt has grown from $2.1 trillion to $28.2 trillion, which is greater than the combined GDP of the US, Germany and Japan over the same period.

    While mainstream macroeconomics literature tends to largely focus on the government proportion of total debt, it is also important to note that other constituents like corporate debt, financial debt and household debt (in the Chinese context) tend to matter more in gauging a country’s overall indebtedness. In the Chinese case, government debt (marked at 55% of the GDP) remains low as compared to the other three constituents. Corporate debt and financial debt levels are marked at 125% and 65% of China’s GDP. But which economic factor has elicited such a vast volume of debt in China?

    In a recent analysis on China’s public infrastructure-led investment model by some Oxford-based economists, it is shown how lower-quality, high cost ridden public infrastructure investments across China triggered a massive volume of overall debt, bringing the Chinese economy to the cliff of a national debt crisis.

    On observing the investment and debt figures closely, one finds that the growth in China’s absolute debt is almost in equal proportion with the total capital investment; which between 2000 and 2014 was cumulatively $29.1 trillion. Scholars Steven Barnett and Ray Brooks support this further through their study, highlighting that the majority of investments China has made since 2000 remain debt-fuelled.

    [​IMG]
    China’s Gross Fixed Capital Formation (blue bars) vs China’s government debt-GDP level (dotted line). Source: Trading Economics Database



    [​IMG]
    China’s growing debt pile (debt-to-GDP, %). Source: McKinsey

    The biggest increase in the accumulation of debt came in from the corporate and financial sector (dominated by the big four state-owned banks in China). Most of these companies (including the non-state owned private enterprises) borrowed extensively from financial markets to finance large scale infrastructure projects.

    The infrastructure investment-led bubble

    The traditional wisdom in macroeconomics on the utility of infrastructure investment, in recent times is built from studies by Paul Krugman (1991), David Aschauer (1989, 1993) who provided econometric evidence for the case of large-scale infrastructure projects (such as rail, roadways) that in lowering transport costs led to increasing returns (i.e. through greater output, more private investment, employment growth).

    While the econometric evidence cited in these studies does present a strong policy case in pushing for greater large-scale public infrastructure investment, in the Chinese case there is scant bottom-up evidence in this regard. The actual outcomes of specific investment projects present massive costs incurred in the building process of these mega projects, particularly in emerging economies like China.

    The study by Ansar, Flyvbjerg, Buzier and Lunn reports results on “95 road and rail transport infrastructure projects built in China from 1984 to 2008 and comparative results with a dataset of 806 transport projects built in ‘rich democracies’”. The economic value of a given infrastructural project is tested by the benefits to cost ratio level (BCR) which needs to be either equal to or greater than one (BCR > 1.0).

    [​IMG]
    Average Schedule Overrun of Chinese Projects (in %). Source: Study by Ansar, Flyvbjerg, Buzier, Lunn

    In their results, 75% of the 95 transport projects in China suffer a cost overrun (in local currency terms), while the actual costs incurred on these projects remain 30.6% higher than the original, estimated cost.

    The figure above helps in giving an approximate idea on the average schedule overrun (in %). As projected by the analysts, the actual average construction time taken to complete infrastructure projects (4.3 years) remained less than the average time used by the richer democracies (6.9 years). At the same time, there aren’t any schedule overruns (only one in every two projects encountered a schedule delay in China, compared to seven out of ten in richer democracies). The problem, however, remained with the costs incurred and the quality and safety attached with actual outcomes delivered in the infrastructure projects completed.

    In building infrastructure at an impressive speed, the Chinese corporate enterprises (state and non-state owned), financial markets traded off with quality, safety and the estimated cost of these projects. The combined effect of benefit shortfalls and cost overruns pushed the BMR below one.

    While conventional macroeconomic theory may typically treat all infrastructure as part of an exogenous cost-reducing technological input into the economy, to drive growth, it is increasingly becoming evident that most models arguing for such investment, intuitively assume that more and better infrastructure reduces the cost of transporting goods and services.

    The evidence cited from China lucidly suggests that poor project-level outcomes translate into “substantial macroeconomic risks”, like accumulating debt, higher percentage of non-performing assets, distortionary monetary expansion from central banks (involving printing of more local currency to finance high cost infrastructure investment) and so on.

    Such a pattern clearly signals a warning sign for most emerging economies that seek to embark on a China-style public investment model in the quest of achieving higher economic growth. China’s case offers significant macroeconomic policy lessons where emphasis on deep institutional reforms along with the development of quality, sustainable physical infrastructure needs greater emphasis (both from the government and the private sector).

    Countries like India, which are currently in process of homogenising large scale infrastructure projects across the country, need to be wary of the costs-returns attached with such projects. Robust project designing frameworks, periodic monitoring tools and better outcome-based impact assessment models are critical in the process of achieving consistent developmental growth.


    source: The Other Side of the Chinese Economic Miracle
     
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  4. venureddy

    venureddy Major SENIOR MEMBER

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    nice development but please don't drag modi into everything. i understand that he was a great PM and i support him but still a news which was supposed to be an economic news sounds more like a political news when we read the title of the thread.
     
  5. venureddy

    venureddy Major SENIOR MEMBER

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    they has some phenomenal growth rate but i believe that you know that growth rate calculation in china and India is very much different. i support your statement THAT THERE IS NO POINT IN COMPARING but not as you think.
     
  6. venureddy

    venureddy Major SENIOR MEMBER

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    nice
     
  7. venureddy

    venureddy Major SENIOR MEMBER

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    @Indx TechStyle has done a very good job by posting what i have in my mind.
     
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  8. Indx TechStyle

    Indx TechStyle Lieutenant FULL MEMBER

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    F** those Chinese trollers calling India's GDP numbers "doctored".
    By The Diplomat
    [​IMG]Image Credit: Wikimedia Commons/ Ermell
    China's GDP Growth: Slow and Slower?
    China’s official figures show slowing growth – and the real picture may be worse.

    China has slumped to its slowest annual growth rate since 1990. With the yuan diving and a new Trump administration to contend with, Beijing has its hands full keeping Asia’s biggest economy on track in 2017.
    On Friday, Beijing reported a 6.8 percent rise in gross domestic product (GDP) for the December quarter, slightly higher than the 6.7 percent median estimate predicted by a Bloomberg survey. For 2016, the world’s second-largest economy reported GDP growth of 6.7 percent, right in the middle of the official target of 6.5 to 7 percent and virtually in line with Chinese President Xi Jinping’s recent forecast.

    The official data pointed to stronger retail sales, rising by 10.9 percent in December, while industrial production weakened to 6 percent growth. Fixed asset investment grew by 8.1 percent over the year, weaker than the 10.7 percent reported in the first three months of the year, although the services sector picked up speed, posting a 7.8 percent rise compared to manufacturing’s 6.1 percent.

    The official data pointed to stronger retail sales, rising by 10.9 percent in December, while industrial production weakened to 6 percent growth. Fixed asset investment grew by 8.1 percent over the year, weaker than the 10.7 percent reported in the first three months of the year, although the services sector picked up speed, posting a 7.8 percent rise compared to manufacturing’s 6.1 percent.

    For the year, consumption contributed nearly 65 percent of growth, indicating the much-touted switch to consumption-driven growth may be building momentum.

    Nevertheless, Bloomberg economist surveys are tipping only 6.4 percent GDP growth in 2017, compared to the 6.5 percent expansion forecast by both the International Monetary Fund and the World Bank. Both figures would represent a further slowing in the growth rate from the double-digit pace seen just a few years ago.

    “Once the impact of past policy easing wanes, we think the economy will likely slow again,” Capital Economics’ China economist Liu Chang told the Australian Financial Review.

    “There are already signs that the property market is starting to cool. Credit growth has peaked. A sharp drop-off in activity is not likely. But growth is likely to slow in 2017.”
    Among the difficulties for policymakers are the recent slump in the currency, with the yuan posting its biggest annual fall in two decades of 7 percent, and increasing capital flight pressures amid a rising U.S. dollar.

    Beijing sold some $66 billion worth of U.S. Treasuries in November, its largest monthly fall since 2011, and while it still holds more than $1 trillion worth of U.S. government debt it is now the second-largest holder behind Japan.
    Meanwhile, policymakers face the growing prospects of a trade war with the United States. U.S. Treasury Secretary nominee Steven Mnuchin said during a confirmation hearing he was ready to label Beijing a currency manipulator, while Commerce nominee Wilbur Ross has called China the “most protectionist” nation among the major economies.

    China’s seemingly stable expansion in 2016 came on the back of 15 percent loan growth, with outstanding credit rising to an estimated 264 percent of GDP. This helped fuel a rally in property prices, adding to concerns of a new asset bubble.

    “China’s economy ended 2016 with short-term growth firmly on track, but long-term sustainability veering further off it,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen said.


    ‘Fake GDP’
    Adding to concerns over the state of China’s economy are reports of exaggerated economic data from the provinces. In 2012, the sum of all provincial GDP was 5.76 trillion yuan ($837 billion) more than the national figure, sparking speculation that the regions have been over-inflating numbers to gain Beijing’s favor.
    According to the Australian Financial Review, Liaoning Governor Chen Quifa recently admitted to the local legislature that the province faked growth data between 2011 and 2014, with fiscal revenue overhyped by as much as 20 percent in some years.
    With China’s GDP reportedly growing by exactly 6.7 percent in the first three quarters of 2016, and 6.8 percent in the last quarter, China bears have had plenty of reasons to be suspicious amid slumping global trade, fluctuating oil prices, and sharemarket volatility that impacted every other major economy.
    Capital Economics’ “China Activity Proxy” based on credit demand, domestic freight, electricity production, floor space under construction, passenger traffic, and seaborne cargo presents a different view of the official data.
    The London-based consultancy’s survey showed China’s GDP slumping from 6 percent at the end of 2014 to around 4 percent, only rising back up toward 6 percent following last year’s massive credit stimulus. It believes GDP will fluctuate between 4.5 and 5 percent in 2017.

    “If the data is not credible, it affects how investors look at China’s policies in general. The lack of credibility also makes it much harder for China’s policymakers to do their job,” Capital Economics’ Mark Williams told the Australian financial daily.

    Is China faking it until it makes it? Asia will be hoping that Beijing can get a better grip on its economy in 2017, amid growing challenges to its ambitions, both internal and external.
     
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  9. Indx TechStyle

    Indx TechStyle Lieutenant FULL MEMBER

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    Seriously, if you guys notice about economic growths of India and East Asian countries in PPP, India has done pretty job, the inflation factor and inflated economies of East Asia put them ahead. Dramatically, they too are getting beaten up now.
    Same is growth rate for China. If you take only GDP growth, China's GDP goes mere to $5.4 trillions, not far away from from Indian approach but inflation rate changes it all. That's why I'm calling them "inflated economy".
    Based on the Non-Massaged Data, China is Growing at 3% at Best
     
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  10. Ghanta

    Ghanta 2nd Lieutant FULL MEMBER

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    China has a bigger problems in its hands. They had an explosive economic boom fueled by credit. Currently it stands over 400% of its GDP. Now the problem with credit is that you have to repay it to the creditor. But in china's case the creditor is PBOC (chinese central bank). In this case 2 things can happen:
    1. PBOC forgives the loan completely. ( This would cause a huge currency devaluation which would make it akin to current Venezuelan situation).
    2. PBOC starts printing money. (This would in future lead to a Zimbabwe type situation where in 1$ = 1 million RMB).

    Now PBOC is currently going through case 2. They have been printing money according to the report below.
    ++++++
    http://www.zerohedge.com/news/2017-...ects-record-1035-trillion-bank-liquidity-week

    China Central Bank Injects A Record 1.035 Trillion In Bank Liquidity This Week
    [​IMG]
    by Tyler Durden
    Jan 18, 2017 9:47 PM

    Heading into the Chinese Lunar New Year, local banks are suddenly starved for liquidity like never before. On Tuesday China’s benchmark money-market rate jumped the most in two years, with unprecedented cash injections by the central bank being overwhelmed by demand before the Lunar New Year holidays.

    Demand for cash in China tends to increase before the Lunar New Year holidays, when households withdraw money to pay for gifts and get-togethers. Month-end corporate tax payments are adding to the pressure this time, with the break running from Jan. 27 through Feb. 2. At that point the PBOC usually steps in with liquidity "injections" in the form of reverse repos. However, what it has done this year is literally off the charts.

    On Wednesday, the People’s Bank of China put in a net 410 billion yuan ($60 billion) through open-market operations, the biggest daily "injection" on record. Despite this massive boost in liquidity, the interbank seven-day repurchase rate still jumped 35 basis points, the most since December 2014, to 2.76 percent, according to weighted average prices. Yesterday, the overnight repo rate rose 10 basis points to 2.50 percent, the highest since April 2015, according to weighted average prices.

    So, with liquidity still scarce, moments ago on Thursday morning, the PBOC added another net injection of 190 billion consisting of 100Bn in 7-day repo and 150BN in 28-day repos, offset by 60bn yuan in previous loans maturing.

    As a result, the PBOC has injected a net of 1.035 trillion yuan via reverse repos so far this week, an all time high.

    [​IMG]

    It was unclear if the rise in 7-day interbank repo rate had continued to rise.

    “The PBOC aims to ensure that the liquidity situation remains adequate, while the 28-day reverse repo is apparently targeted at covering the holidays,” said Frances Cheung, head of rates strategy for Asia ex-Japan at Societe Generale SA. “There could also be preparation for any indirect tightening impact from potential outflows.”

    Liquidity conditions are under pressure also because loans are due to mature under the Medium-term Lending Facility, according to Long Hongliang, a trader at Bank of Hebei Co. in Beijing. There are 216.5 billion yuan of MLF contracts maturing this week, data compiled by Bloomberg show. The PBOC offered 305.5 billion yuan of loans to lenders using the tool on Jan. 13, compared with 105.5 billion yuan due that day.

    As Bloomberg notes, China’s central bank has been offering more 28-day reverse repos than one-week loans in the past two weeks, while curbing the injection of cheaper, short-term funds amid efforts to lower leverage in the financial system. It drained a net 595 billion yuan in the first week of January, before switching to a net injection of 100 billion yuan last week as the seasonal funding demand started to emerge. However, this week's injection so far of over CNY 1 trillion suggests that there may be something more to the banks' liquidity needs than simple calendar action.


    ++++++

    Now in the last week itself they have added $150Billion into their banks. Currently they can afford it due to vast amount of reserves amounting to $3trillion(? questionable since they have been investing a lot of them in many ventures throughout the world eg. CPEC, Venezuela etc and only 22% of which is $). But it is only a matter of time when the reserves drop if Trump continues with protectionism. When that happens China will have to burn through its reserves in an alarming rate just to stabilize their currency against $. (Trumps current rhetoric suggests he plans on pursuing this path with China).

    Currently while China has been able to taper off the excess fluctuations in its currency(by small amounts of devaluation). It cannot continue to do so forever. And when the time comes we might see a huge devaluation in its currency.

    ++++++

    For those wondering about US keeping on printing $. Well, $(petro-dollar) is a reserve currency. So for now it can keep on printing as long as OPEC is happy to accept $. When OPEC stops, US is f****d overnight. They don't have a backup plan for $20 Trillion in loans they currently posses. There can't be any backup plan available for it. So, if when that happens you have a $ in your hand use it as a tissue paper. Because that's all that it will be worth.
     
    Last edited: Jan 22, 2017
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  11. venureddy

    venureddy Major SENIOR MEMBER

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    That is the reason US is involved so much in the middle east.
     
  12. dadeechi

    dadeechi Lieutenant FULL MEMBER

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    This does not take into consideration the effect of demonetization of Rs 2000 note post Apr-2017..
     
  13. randomradio

    randomradio Colonel Technical Analyst

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    I doubt it will be demonetized. It's just rumours.
     
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  14. lca-fan

    lca-fan Major SENIOR MEMBER

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    China too tried to woo middle east countries especially Iran to except yuan as currency for their oil. They wooed Iran and other regimes like Libya, Syria who opposed US to make Yuan a Petro currency. US seeing this and its implication on Dollar mend their relations with Iran (here India helped mend its relation with Iran) and that's precise reason why Iran and now US has special relations with India and weaker nations like Syria and Libya are finished through proxy means some say some sections ISIS is working for CIA these are now being targeted by Russia, which has caused friction between US & Russia. Saudi Arabia, UAE, Jordan, Kuwait and other countries that support US and control OPEC know very well if they oppose US their country too will meet the same fate and so maintain good working relations and work according to US wishes, opposing US is no option for them. US buys crude gives them dollars, which they use to buy US bonds and weapons and other luxury goods from US, this circle continues which generates demand for more dollars which they can go on printing.

    China tried to replace dollar with yuan this would have been killing 2 birds with 1 stone. US economy and US itself would have been finished ala Russian style and China would have then become sole world power with Yuan becoming world currency. US saw this and they took above mentioned steps and is now working with India to weaken Chinese economy. Even as Obama left president house he has advised Trump to continue relations and policies with India to tame the Lizard.

    Now coming to China they have $11 trillion economy but their debt exceeds $30 trillion. Last year itself their economy went bust on 2/1/2016 when stock market crashed knowing this data. Chinese govt very cleverly rotated this debt and not it is living on this rotational debt. It is like old hindi saying "aaj ki maut kal pe talna". Chinese economy is doomed already and will further go down with Trump's policy of buy American hire American. They have built 1000 cities with no one to live these are called ghost cities, more than 11000 kms of bullet train network has been built but ticket costs are to high for common man so are running empty, overcapacity in Steel and other goods factories, etc. All this has been built by debt which is no longer serviceable. So Chinese downfall is imminent how much time it takes is the only matter.
     
  15. venureddy

    venureddy Major SENIOR MEMBER

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    Chinese economy is a bubble waiting to burst.
     

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