There are other presentations and interviews where he repeats these arguments. While there is definitely a bit more detail and statistics on the site, it's not significantly more. And articles like the one below where he is correcting his own back-of-the-napkin estimates don't inspire confidence:
Interesting quote from him: "Maybe it is the pessimist in me, or maybe I’ve written so many “China will slowdown articles” that I am looking for data confirming my view (the confirmation bias) – that is possible, I am human after all."
And another which I think is quite a good summary of his arguments:
"I have absolutely no facts to back up what I am about to say, but it is not hard to imagine future stories about poverty stricken farmers that moved to big cities for a better life and found despair; or that inland migration (from farming to factories) only brings a onetime productivity jump as poorly educated farmers-turned-factory-workers add little to productivity improvements afterwards; or how weak and debt ridden the financial system is; or the devastating impact that pollution has on health and productivity; or how the biggest shopping mall in the world, that happens to be in China, is almost completely empty. "
The book appears to be fairly generally about trading rather than being focused on this particular question.
All in all, I'm still left thinking that there is not much more to this gent's arguments than came out in the CS Monitor article.
He doesn't think much of China's infrastructure build out (based mainly on the possibility that it is inefficient or overheating). But perhaps overseas student numbers are more revealing - presumably education is valuable even if infrastructure isn't.
I had a dig around for some statistics, and found the Australian government page on this:
That's 17% growth from 2008 to 2009. (Incidentally US figures have gone down.) Not a perfect proxy for economic growth, but then what is? There may be a bubble here and there, but on the face of it China seems to have a lot of advantages.
As for not having a social safety net, it appears they've thought about the one:
I don't know if China's stimulus is as distorting as the article suggests, but it seems to me that now is as good a time as you're going to get to spend your dollars overseas if you've got some spare. I wouldn't bet on the stories about new investments in solar power, African minerals, and high speed train networks drying up just yet.
I don't think that reflects the current economic fact by evaluating oversea student number. The way families in China to collect tuition towards college is much like many families in the United States. They just start early. Thus, it cannot reflect the economic status at this very moment. Besides, although whether true or not is unclear, I do believe Asian families in general are more willing to invest in education. The number of people who is taking National College Entrance Exam is dropped from 2008. It is a safe bet that the number of oversea student will drop in 5 to 6 years (due to the birth control policy).
Persistent bears will eventually be right, given long enough time, to call out the bubbles. A broken clock is right on time twice a day. Many bears shorting the bubble leading upto the 2005/2006 crash had lost their shirts.
Persistent bulls will eventually be right, given long enough time, to call out the bubbles. A broken clock is right on time twice a day. Many bulls long on the bubble leading upto the 2008/2009 crash had lost their shirts.
This article is basically political bullshit masquerading as some sort of prediction.
Where exactly is this bubble? The author's logic appears to be: "China has defied the recession, therefore the economy is a bubble!"
China's economy has been turbulent over the past 30+ years, but with a lot of saved money (both at the personal and government levels), they've been able to weather much worse than the US's current situation. Massive unemployment, food shortages, inflation, you name it, they've been there.
But for a "bubble" to be afoot as suggested, there really should be speculation of some sort going on, which the author doesn't even go into. Sure, the price of real estate has tripled in the past decade in many areas of China (which he also doesn't mention), but for a nation bent on saving money rather than massive mortgages, it's not clear whether that's really a bubble or just what people can actually afford.
High GDP growth at this stage in China's development doesn't mean it's definitely a bubble either, nor do they have to keep it up. It's like a start-up who get's 80% traffic growth on their website every month for the first 6 months, it will slow down eventually and that's ok. China doesn't have to keep this rate of GDP growth to keep people happy: a higher standard of living will do that too.
China is complex and our understanding of their society and economy seems poor at best. People like this author don't help.
In any case, there are valid arguments (both pro and anti bubble), but this article is missing a lot.
They keep building lots of unused housing and buildings. This would be a bubble in a western country, but I'm not so sure in China. Because they have 1.3 billion people, and the majority live in the countryside and are not even allowed to move to the cities yet even though they want to.
I am interesting in the correlation between the barrage of "China is melting" stories recently and the recent article on how a large percentage of news stories are given to the agencies by corporations/special interest groups (can't find the link). As new agencies tend to parrot each other it probably wouldn't be that expensive to start something like this.
21 comments
[ 5.0 ms ] story [ 89.9 ms ] threadauthor has an interesting site and a book,
http://contrarianedge.com
for those like me who want to investigate further.
It does look like he repeats the same story a lot on that site. Here's a very similar story from 2008:
http://contrarianedge.com/2008/08/21/chinese-and-starbucks-l...
There are other presentations and interviews where he repeats these arguments. While there is definitely a bit more detail and statistics on the site, it's not significantly more. And articles like the one below where he is correcting his own back-of-the-napkin estimates don't inspire confidence:
http://contrarianedge.com/2009/07/30/reappraising-china%E2%8...
Interesting quote from him: "Maybe it is the pessimist in me, or maybe I’ve written so many “China will slowdown articles” that I am looking for data confirming my view (the confirmation bias) – that is possible, I am human after all."
And another which I think is quite a good summary of his arguments:
"I have absolutely no facts to back up what I am about to say, but it is not hard to imagine future stories about poverty stricken farmers that moved to big cities for a better life and found despair; or that inland migration (from farming to factories) only brings a onetime productivity jump as poorly educated farmers-turned-factory-workers add little to productivity improvements afterwards; or how weak and debt ridden the financial system is; or the devastating impact that pollution has on health and productivity; or how the biggest shopping mall in the world, that happens to be in China, is almost completely empty. "
The book appears to be fairly generally about trading rather than being focused on this particular question.
All in all, I'm still left thinking that there is not much more to this gent's arguments than came out in the CS Monitor article.
I had a dig around for some statistics, and found the Australian government page on this:
http://aei.gov.au/AEI/MIP/Statistics/StudentEnrolmentAndVisa...
Statistics for China:
2005 - 84,476
2006 - 93,533
2007 - 110,846
2008 - 131,210
2009 - 154,777
That's 17% growth from 2008 to 2009. (Incidentally US figures have gone down.) Not a perfect proxy for economic growth, but then what is? There may be a bubble here and there, but on the face of it China seems to have a lot of advantages.
As for not having a social safety net, it appears they've thought about the one:
http://www.google.com/hostednews/ap/article/ALeqM5jGQDE0Z2Lb...
I don't know if China's stimulus is as distorting as the article suggests, but it seems to me that now is as good a time as you're going to get to spend your dollars overseas if you've got some spare. I wouldn't bet on the stories about new investments in solar power, African minerals, and high speed train networks drying up just yet.
Where exactly is this bubble? The author's logic appears to be: "China has defied the recession, therefore the economy is a bubble!"
China's economy has been turbulent over the past 30+ years, but with a lot of saved money (both at the personal and government levels), they've been able to weather much worse than the US's current situation. Massive unemployment, food shortages, inflation, you name it, they've been there.
But for a "bubble" to be afoot as suggested, there really should be speculation of some sort going on, which the author doesn't even go into. Sure, the price of real estate has tripled in the past decade in many areas of China (which he also doesn't mention), but for a nation bent on saving money rather than massive mortgages, it's not clear whether that's really a bubble or just what people can actually afford.
High GDP growth at this stage in China's development doesn't mean it's definitely a bubble either, nor do they have to keep it up. It's like a start-up who get's 80% traffic growth on their website every month for the first 6 months, it will slow down eventually and that's ok. China doesn't have to keep this rate of GDP growth to keep people happy: a higher standard of living will do that too.
China is complex and our understanding of their society and economy seems poor at best. People like this author don't help.
In any case, there are valid arguments (both pro and anti bubble), but this article is missing a lot.
japan has the highest personal savings rates in the world yet their economy falls further into the toilet. this is a non-sequiter
High GDP growth at this stage in China's development doesn't mean it's definitely a bubble
every, EVERY debt chart in china has gone parabolic. if this isn't a bubble, then our housing market up until 2008 wasn't a bubble either
China is complex and our understanding of their society and economy seems poor at best
? china's economy is being very well documented. you just don't seem to like the data so you're dismissing it as conjecture
The price of real estate has tripled, while the GDP hasn't. Clearly, not all the people can afford the price.
so why don't you mention some of the arguments he missed, because I can't see any?
http://en.wikipedia.org/wiki/New_South_China_Mall
99% empty mall, Western Fastfood companies are only draws.