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China's Debt Bubble

Discussion in 'China & Asia Pacific' started by Som Thomas, Aug 21, 2017.

  1. Pundrick

    Pundrick Lieutenant FULL MEMBER

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    If somebody thinks that the next crisis "will" be from China then he/she is wrong, because China is already in crisis. Their industrial infra will collapse if they don't stay competitive in coming 4-5 years, Indonesia, Vietnam, Bangladesh & India are already leveraging the benefit of lower cost and China is losing its only advantage of being a low cost manufacturing hub. CPC is trying their best, from last 6-7 years to create a consumer base which can help in survival but that is not reflecting and this has created the so called "Chinese Debt Bubble" which will burst if CPC doesn't bring out some big package, which will further hurt their Forex.

    Remember one motto of economics, "The faster your economy grows the faster it will mature/saturate". CPC just didn't understood this principle and started following growth numbers, which btw are also fake.
     
  2. Golden_Rule

    Golden_Rule Lieutenant FULL MEMBER

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    Chinese economy can only go down with an external trigger. Expansion of internal debt to any extent will not cause China to slow down. It will continue to keep hiding its bad debt till eternity for the Casino to keep running. Of the $34t, today's bad debt is estimated to be $6.8t. This does not bother China as it is its own money printed internally and has no accountability to anyone.

    China's economy can only crash when manufacturing, which employs majority of the working class population as well as manufacturing business entities moves out of the country and the western economies go in recession. This is when demand for what the Chinese make will go down and impact millions. This will lead to a stage of internal turmoil.

    Of the four categories of the Chinese debt spread over $34 trillion - Financial Sector, Government, Household, non-fin Corporates,

    - Household borrowings are mainly for real estate
    - Government borrowing is for infrastructure
    - Financial Sector is mainly to keep the Stock markets propped up, and
    non-financial Corporate debts are the worst created out of over capacity

    We have seen in the past whit Japanese stagflation, European recession, ASEAN crisis, none of these impacted global economy in a significant way. Because these economies do not control the flow of dollars. It is only when the Fed decides to recall dollars and squeeze monetary policy, a massive impact on global economic recession will be felt. And the trigger will be either Banks or Sovereign debts or the Derivatives.
     
  3. Bloom 17

    Bloom 17 2nd Lieutant FULL MEMBER

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    What is the saturation point for china? US slowly began moving manufacturing out of china.
     
  4. Golden_Rule

    Golden_Rule Lieutenant FULL MEMBER

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    China took 30 years (1987 to 2007) to move 30 million workers from heartland to the coastline where all the manufacturing hubs were established. And it took the 2008-2010 recession to send back 3 million workers back home. It caused a significant dent in China's economy. And it was caused by a Lehman and several other that followed. As we speak, there are at least more than 15-20 flash points which are several times bigger than Lehman and are waiting to implode. And all these are directly related to Euro and Dollars. But these have been covered under wraps, similar to the Chinese GDP numbers and its economy.

    The saturation point was already created in the last recession and it has never dried since then. This prediction is under no one's control, it will happen when those in control want it to happen in order to achieve their predetermined objective!!
     
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  5. Pundrick

    Pundrick Lieutenant FULL MEMBER

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    Chinese economy hasn't reached its saturation point yet and it will take sometime to reach that stage, but the growth rate which CPC wants to attain i.e. 6-6.5% is not sustainable and whatever data they have made public looks fake.

    But if CPC doesn't project the 6-6.5% GDP growth rate then the crisis, which is evident, will come earlier. In short CPC is just delaying the crisis, and waiting for some miracle to happen e.g. consumption to increase in world.
     
  6. Bloom 17

    Bloom 17 2nd Lieutant FULL MEMBER

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    Chinese projection themselves show the growth is going to fall down to 4.5 or so in 2 to 3 years time. So why fake it now? The consumption is not going to sky rocket any time soon
     
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  7. Pundrick

    Pundrick Lieutenant FULL MEMBER

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    There is a benefit of faking the data or showing fake "gradual" decrease rather than a sudden fall in growth number. Remember how their share market panicked in 2012, this could happen again if CCP doesn't maintain the numbers. Many foreign investor are involved in this and they also want CCP to fake it so that they could leave the Chinese market in phases without creating any havoc.

    Also if China fails it will take USA with it as well, hence you'll hear statements from Trump about trade barrier/tariffs and blah blah for political gain but he won't take any step until maximum of USA investors get out of this market and invest their money inside USA, which BTW looks viable for them, but latin america, south asia & asean markets still has much more to offer to the investors.
     
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  8. An Indian

    An Indian 2nd Lieutant FULL MEMBER

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    You know what, I agree with you. Let me give you (some background and) my logic. There are two types of bubbles - an asset bubble (where assets are created and are over valued) and a debt bubble (where too much money chases the same set of assets) and this is the global situation. There's more but essentially that's the difference.

    The end game of such a (debt fuelled) bubble bust is that the people holding the debt lose money massively and eventually get pennies to the $ (eg. Realty in the US in '08) but the assets remain.

    China knows it is going to go bust. So it is using its money to buy as many assets (and these are largely good assets - OBOR etc.,), build as much infrastrucure as possible before it goes bust. Once the bust happens - and it will be a global bust (including the US that also have a pretty large debt overhang. Remember a large part of the US (gilt) bonds are held by China), China will be owning a lot of assets that it can then use (post-bust) to consolidate its global heft. Also a lot of people (including US/EU - we seem to have forgotten PIIGS, ME (All the oil fed economies)) will not have much left and there will be chaos.

    That is when it plans to stride to the center of the stage as THE won-yand-yonly super-power. Though if we play our cards right, we can beat them at their own game - we can also be there - a kind of andhon me kaana raja ishtyle.
     
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  9. Bloom 17

    Bloom 17 2nd Lieutant FULL MEMBER

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    Lol the last paras funny.
    For my level of knowledge I would give china a decade before it goes burst
     
  10. An Indian

    An Indian 2nd Lieutant FULL MEMBER

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    Data shows countries that cross 120% have a hard landing (this is without exception). China crossed 120% two years ago. In two years they have gone from 120% to 300%. Add to this - their market is exports and both the EU and US (their primary markets) are already slowing down/headed for a recession - there's talk of a recession a year down the line...
    A lot of their investments (Habanatota etc.,) are still to generate returns....

    BTW, think of the impact on their two little chicks - those should come home to roost then...

    Would you like to take a second guess.
     
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  11. Bloom 17

    Bloom 17 2nd Lieutant FULL MEMBER

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    Is the 120% you referring to debt to GDP ratio? Because that was crossed way back in 2002 only right?
     
  12. Indian Jatt

    Indian Jatt Lieutenant FULL MEMBER

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    And yet they want to do business with India, because the land of doklam is not worth losing $65 dollars....
    Anything up on the case about shoes being packed in tricolor boxes?
     
  13. An Indian

    An Indian 2nd Lieutant FULL MEMBER

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    Public Debt to GDP.
    The private + Public debt was crossed well before (2002 - perhaps, I don't have data).
     
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  14. Agent_47

    Agent_47 Admin - Blog Staff Member MODERATOR

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  15. sunny6611

    sunny6611 Lieutenant FULL MEMBER

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    who all have had read economics would know that the domestic currency has to be more fluid (availability)than the forex.

    china has become an exporter only.

    all production is in domestic currency being exported (out going) & incoming is in $$$.

    slowly they had run out of domestic currency where as $$$ is in very large availability. >>>>>> so they had no option to go for domestic currency loans which again led to further depletion of domestic currency within china.

    this loop will carry on till they devalue (then exports will become costly) or agree to high inflation(thenagain exports will become costly) or increase domestic consumption(if the locals have that much income).

    they r running a capitalist economy in a communist way ................ just 1 hit & their economy falls like a house made by cards.
     

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