A month ago we pointed out that even as the Chinese credit bubble – at a record 240% of GDP on a consolidated basis – is now clearly out of control, the far more disturbing aspect of China’s credit-fueled economy is the ever declining boost to economic growth as a result of every incremental dollar created. Indeed, as the economic response to “credit shock” becomes lower and lower, even as the inflationary [...]
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Credit Shock Dead Ahead: China Money Formation Soars To 2-Year High As Delinquent Loans Surge By 29%by Phoenix Capital Research
Let’s wind the clock back to 2008. The world was thought to be ending. Lehman went bust. Markets were plunging. Everyone was scared that growth was over. It was as though the global economy was grinding to a halt. But then China’s stock market bottomed. The Chinese Government announced a massive stimulus plan to turn its economy around. And sure enough the Chinese economy took off again. A few months [...] The Stock Market Is Looking Like 2000 And 2007 All Over Again “I have to get into this market; otherwise it’s just dragging on me” (A portfolio manager quoted in the Wall Street Journal just prior to the March 2000 peak in the S&P 500.) “..as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” (Citigroup CEO Chuck Prince in July 2007) You know how that turned out. It’s that [...] from FT: It is easier to make money than sense out of China’s banks. These big four state-owned commercial banks are huge profit centres, but many who see vulnerabilities in China’s economy think that these banks are the problem when they actually reflect symptoms of distortions elsewhere. China’s banks are in fact too secure – and their performance could be improved by strengthening competition and breaking up the “too big to [...] Craig Stephen: China has an overcapacity problem Commentary: China Mobile homemade-tech risks offer case in point The Chinese economy found a new gear in the last quarter of 2012, as growth re-accelerated. But corporate China could find it harder to get an earnings lift from this burst of activity. One recurring fear is that companies, particularly in state-owned industries, are adding capacity they do not need. While this can help support GDP [...] from FT: 2013 will be remembered as the year China became a more “normal economy”. What does normality mean for China? Soon-to-depart Premier Wen Jiabao’s oft-cited quote that China’s growth is “unbalanced, unsustainable and uncoordinated” is a good place to start. China was an abnormal economy with its state-led capitalist approach that produced double-digit growth rates, no major financial crises and average wage increases of 12 per cent annually for decades. But [...]  The debtors’ merry-go-round - Interactive overview of debt in the world’s biggest economies http://www.economist.com/blogs/graphicdetail/2012/09/daily-chart-10
China’s Economy “Bottoming Out”? – Not So Fast! While China’s equity index continues to plumb new depths, the macro data of the past two weeks has been the crutch for US equity bulls losing faith in the fiscal cliff negotiations - growth is up, investment is up, and inflation is down – with analysts hailing the news as evidence that the [...] by Michael A devastating economic depression is rapidly spreading across the largest economy in the world. Unemployment is skyrocketing, money is being pulled out of the banks at an astounding rate, bad debts are everywhere and economic activity is slowing down month after month. So who am I talking about? Not the United States – the economy that I am talking about has a GDP that is more than two trillion [...] HEADS UP: It’s global PMI day, and this is our scorecard. …. SCORECARD Japan: Markit/JMMA Manufacturing PMI — 48.0, up from 47.7 in August The emerging debate over the health of China’s economy demonstrates how the world’s second largest economy is actually more competitive than the U.S., well-known hedge fund manager Ray Dalio told CNBC Friday. The founder and co-chief investment officer of the world’s largest hedge fund, Bridgewater Associates, likened China to Japan in its economic heyday. “Years past in Japan when it was going strong, they called a recession anything less than 3 percent [...] Seeing more of this: the earnings cliff may be here. Reaction is very perverse, these individual stocks get hit, but the indexes look rigged with little response so far. - Norfolk Southern (NSC) lowers its Q3 earnings outlook due to declines in certain markets and lower revenues from fuel surcharges. NSC expects decreased coal and merchandise shipments, offset in part by growth in intermodal volumes, to reduce revenues by ~$120M Q/Q. NSC -5.8% AH - Bed Bath & Beyond (BBBY): [...] From Economic Policy Journal: How bogus is the economic data coming out of China? Probably very bogus. Even the Federal Reserve is warning about the data. Janet Koech and Jian Wang economists at the Federal Reserve Bank of Dallas, in a recent paper, make the message clear: don’t trust Chinese economic data… China’s economy deteriorated rapidly in 2012, with GDP growth slowing to 8.1 percent in the first quarter from 8.9 percent at [...] ANAHEIM, CALIF. (CNNMoney) — After four straight months of declines, consumer price inflation has finally edged up in China. China’s annual inflation rate rose 2.0% in August, the government’s National Bureau of Statistics reported Sunday, up from 1.8% in July — a two-and-a-half year low. Food prices, which account for more than a third of the inflation calculation, rose 3.4% during the month. Household finances in China are especially susceptible to fluctuations in food [...] by Tony Cartalucci War, economic collapse, and personal devastation await Americans no matter who they vote for – and what we should do instead. A vote for Obama will bring war with Syria, Iran, and eventually Russia and China. The economy will continue to suffer in order to bolster the interests of off-shore corporate-financier interests, while the collective prospects of Americans continue to whither and blow away. A vote for [...] 3 Things US Politicians Need To Know About China Patrick Chovanec, An American Perspective From China | This weekend, I was quoted in The Weekly Standard about what Mitt Romney and Paul Ryan need to know about what is happening in China. It begins by noting that Paul Ryan, Romney’s surprise VP pick, came out swinging the other day on President Obama’s handling of China: “Free trade is a powerful tool for peace and prosperity, but our trading partners need to play by [...] (Reuters) – China’s economy faces big headwinds though cooling inflation is giving the government more leeway to maneuver monetary policy, Premier Wen Jiabao was quoted by state media as saying on Wednesday. Wen’s comments followed a raft of data last week that suggested China’s economy has not stabilized despite two interest rate cuts this year, as export growth, factory output and retail sales further weakened in July.
http://www.reuters.com/article/2012/08/15/us-china-economy-wen-idUSBRE87E0EE20120815?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943 Growth in China has already slowed to a three-year low, expanding at an annual rate of 7.6 per cent in the second quarter. China has been warned that meltdown in the eurozone poses a ‘key risk’ to its economy as the crisis in the single currency reverberates around the world. Alarm bells also rang in Japan, the [...] The International Monetary Fund (IMF) has warned that the worsening debt crisis in the eurozone poses a “key risk” to China’s growth. The IMF added that China also faces domestic risks, not least from a sharper-than-anticipated decline in the property market. However, the fund said China had ample room and the fiscal tools “to respond forcefully” to any such developments. Growth in China’s economy slowed to a three-year low in the second quarter. Its [...] Everyone agrees that China’s economy is slowing. In a year of political transition, the Asian giant has to grapple with a deflating housing bubble, job creation, an economic slowdown, a massive shadow banking system, and reforms that would help internationalize their currency. Societe Generale’s Wei Yao put together this fantastic presentation on the state of the Chinese economy. NOTE: Thanks to SocGen for given us permission to feature this presentation.
Societe Generale Societe Generale Societe Generale Read more: http://www.businessinsider.com/socgen-presentation-chinese-economy-2012-7?op=1#ixzz219ooulXC From Patrick Chovanec’s An American Perspective from China: There are two schools of thought on the Chinese economy right now. The first says, “It’s always darkest just before the dawn.” The second says, “It’s always darkest just before it goes pitch black.” It’s clear that China’s economy is slowing. But what happens next is far from clear and the subject of much debate. The conventional wisdom at the moment, among officials and economists, [...] Nouriel Roubini, the economist who famously predicted the financial crisis, said he is sticking to his view that the global economy is on course for a “perfect storm” next year.
Mr Roubini, the New York University professor dubbed “Dr Doom”, said a number of unpleasant factors would combine to derail the global economy in 2013, including an escalation of the eurozone crisis. Other factors included further tax increases and spending cuts in [...] Although the GDP figures from China were not yet disastrous, given the very little faith the market has on the accuracy of Chinese data, quite a few people including ourselves suspect growth was actually lower. That suspicion was raised especially when electricity output growth has slowed to zero, which implies much lower growth.
Sell-side consensus, however, believes that growth will recover in the second half of the year. The reason for such recovery [...] Dee Woo, Beijing Royal School
1. The frustrated and aggressive central bank
If one wants to know how bad the health of China’s economy has gone, look no further than the PBOC’s composure, which seems rather frustrated and aggressive as of late. On 5th July, the central bank cut benchmark interest rates for the 2nd time in less than a month. This happened right after the fact that in December 2011, PBOC cut [...] China’s Premier Wen Jiabao warned the momentum for a recovery in economic growth isn’t yet in place and that “difficulties” may persist for a while, the official Xinhua News Agency reported. Even so, the current pace of economic expansion is within the targeted range and government measures to stabilize growth are “bearing fruit,” the premier said during an inspection tour in southwest Sichuan province, according to a Chinese- language report from [...] Amidst growing concerns that China’s growth figures may be overstated, the National Bureau of Statistics announced July 13 that GDP grew 7.6 percent in the second quarter, its slowest pace in three years. A slowdown in investment, including in real estate and infrastructure, the primary driver of China’s growth in recent years, plus a still fragile global economy, are hampering efforts to finesse a soft-landing in the world’s second largest economy. “We [...] KWN Today legendary value investor, Jean Marie Eveillard, told KWN that elites throughout the world are discredited. Eveillard, who oversees $50 billion at First Eagle Funds, also said, “The implications (if the trend continues) would be a chaotic or semi-chaotic period. If the economy does not recover, in what would appear to be a sustainable manner, then the politicians will be under pressure to take very unusual steps.”
He also discussed the [...] (Reuters) – The strength of China’s imports will offer a litmus test of domestic demand in the world’s second biggest economy when trade data for June is published on Tuesday, as global investors seek to gauge Beijing’s ability to avoid a deep downturn in growth. Data on Monday showed China’s consumer and producer prices eased more than expected in June, signalling falling demand for goods from the manufacturing capital of the [...] (Reuters) – As China slips, the second-half performance for many emerging market mutual funds might soon follow. In recent months, investors have been pulling hundreds of millions of dollars out of stock funds that invest mainly in companies associated with the big four emerging market nations of Brazil, Russia, India and China. But it’s China that is causing most of the worry for fund investors, amid signs that the world’s second-largest economy is slowing more [...] The head of the International Monetary Fund expressed concern on Friday at a deterioration in the global economy, saying the outlook has become more worrying as developed and big emerging nations show signs of slowing down. The comments by IMF Managing Director Christine Lagarde came after the European Central Bank, the Bank of England and China’s central bank all eased monetary policy in a sign of the growing alarm over the [...] (Reuters) – China’s factory downturn worsened in June as a key activity index hit a seven-month low, data expected to raise expectations the central bank may seek more policy easing to revive the world’s second-largest economy. The official Chinese purchasing managers’ index (PMI) fell to 50.2 in June after seasonal adjustments, the National Bureau of Statistics said on Sunday, above forecasts for 49.8, but down from May’s 50.4. That was the worse [...] SURVEY SAYS: A Pew Research Center survey of people in 21 countries found that 41 percent said China was the world’s leading economic power, while 40 percent picked the U.S. REALITY: The results do not reflect reality. America’s economy remains well ahead of its closest rival. But it does highlight China’s rising public image amid rapid growth and the erosion of the United States’ status as the global superpower. http://hosted.ap.org/dynamic/stories/A/AS_CHINA_ECONOMY_POLL_SUMMARY_BOX?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-06-13-15-16-45 From Economic Policy Journal: I was among the first warning about problems developing in China’s economy. I even asked the bastard, war criminal, Henry Kissinger about it, when I ran into him last year. The data coming out are now making it pretty obvious that the Chinese economy is in decline. However, I suspect few realize how bad the downturn in China will be. A large part of Chinese “growth” was centrally [...] The giant orange robotic arms that swiftly weld together car frames at the Great Wall Motors factory in Baoding might seem like the perfect answer to China’s fast-rising labor costs – they don’t ask for a raise, get injured or go on strike. For Great Wall, a private sector Chinese car maker that employs 50,000 workers, the Swiss robots and other machinery that line its bright factory floor produce more than [...] |
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