>

Is China’s ‘Real’ Economy Crashing? Investors Should Be Worrying About China’s “Colossal Credit Bubble” And Social Revolution


Is China’s ‘Real’ Economy Crashing?

As Marc Faber noted, we hardly expect China to report GDP growth rates that do not perfectly fit the goal-seeked solution for utopian society, but under the covers, there appears to be some considerably more ugly real data. One of the hardest to manipulate, manage, or mitigate for a centrally planned economy is Electricity production. The year-over-year drop in China’s electricity production is the largest since the slump in Q1 2009; and the seasonal drop (associated with the New Year) is the largest on record at 25.3%! So on one hand China is discussing tightening monetary policy amid inflation anxiety and a potential real estate bubble – thanks to the rest of the world pumping free money – and on the other hand Chinese officials are faced with the reality of a drastically slowing ‘real’ economy. At the same time, we note that it appears China’s export-import data appears overstatedRock meet hard place.

Biggest seasonal drop ever in China electricity production and worst YoY drop since the crash in 2009…

 

Marc Faber Rationalizes The Irrational And Fears China’s “Colossal Credit Bubble”

 

Rational Irrationality; Interest Rate Normalization; and Don’t Trust The Data

 


 

China is heading for a social revolution, according to Fidelity fund manager Anthony Bolton.

Mr Bolton is one of Britain’s most famous fund managers, having earned investors in his Fidelity UK Special Situations fund an average of 20pc a year for 27 years.

He stepped down in 2010 to launch a China-focused investment trust for Fidelity, but performance was disappointing.

He is confident of turning around the situation and remains bullish about the prospects for the country and its stock market.

“There is a new generation of internationally educated, internet-informed individuals who will push for reforms,” he said. “They are aware of the realities of their country and their government in a way that no previous generation has been. The people will want a say.”

Ongoing political rumblings with Japan and South Korea will prove a sticking point with this generation, who are able to access non-censored news through social media websites, he said.

 

Will China’s Social Revolution Turn Out to Be Something More?

Investors in China should be wary of revolution. China is heading for a social revolution, according to Fidelity fund manager Anthony Bolton. Mr Bolton is one of Britain’s most famous fund managers, having earned investors in his Fidelity UK Special Situations fund an average of 20pc a year for 27 years. He stepped down in 2010 to launch a China-focused investment trust for Fidelity, but performance was disappointing. He is confident of turning around the situation and remains bullish about the prospects for the country and its stock market. – UK Telegraph

Dominant Social Theme: China is holding up well and the soft landing is progressing.

Free-Market Analysis: We wrote a number of articles about the threat of social unrest in China using the logic of “three strikes.” The first strike was the great famine under Mao; the second famine was Tiananmen Square; the third strike would be an unwinding of the modern Chinese economy.

This article (excerpted above) makes just this point. While social unrest in China (or worse) is not a given, the current Chinese economy is both overheated and inflationary.

Chinese don’t have very many ways to save, and thus real estate purchases have been an attractive option. Chinese have now purchased millions of empty apartments (which apparently return to the government after 100 years). Whole Chinese cities are empty. This cannot last. Here’s more from the article:

“There is a new generation of internationally educated, internet-informed individuals who will push for reforms,” he said. “They are aware of the realities of their country and their government in a way that no previous generation has been. The people will want a say.”

 

21 Total Views 1 Views Today
Did you already share this? No? Share it now: