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June 27, 2012

Three on why I won't be buying Chinese stocks any time soon

"4 Reasons Why China Is Headed For Meltdown".

China's trade surplus as a percentage of GDP is shrinking. Hence, growth will have to come from domestic demand. The government has tried all sorts of tricks to boost this, but it can't change people's habits overnight. The Chinese people are savers. More so perhaps today than ever before. There is no welfare net to catch them, and the one-child policy has left them with too few children to fall back on.

"The Biggest Sign of a China Bubble".

Money supply rose markedly in May and recent years' credit growth has surpassed even that of the U.S. in the period leading to the Lehman collapse.

Unfortunately, instead of being put to good use, much of that money has ended up in the hands of wasteful state-owned enterprises, or SOEs. Meanwhile, cash-starved private entrepreneurs have watched quietly from the sidelines, unable to participate in Beijing's ragin', capital-misallocatin', credit-fueled investment boom. 

"The Great Fall of China".

These episodes have revealed to the world—and to a sizable portion of the Chinese people—a culture of greed, violence, and deceit at the highest levels of government. The Communists’ power is not in imminent danger, but their legitimacy is.

Comments

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Paul

I think one big reason that investment in China is unwise is that the Chinese Gov't lies. You truly cannot trust anything that Bejing says. I doubt their numbers on growth and GDP. It is very much like the USSR....one day it will collapse and no one really should be suprised.

Petter Joe

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Ken

China's ghost towns should have let the world know just how dumb and meaningless statistics like GDP are, aggregates in which almost all useful information is lost. But what the hell, people like to fool themselves and assume they know more than they actually do.

Hey look China has a booming economy. How do I know? Look how fast their GDP is increasing. Oh, that number is increasing because of the variable G and G includes billions, if not trillions, of dollars building cities in which no one lives? But, GDP is really high! So they must be doing well. Who cares if the average Chinese isn't getting wealthier, what really matters is that one number that of course includes everything important!!

KevinT

A nice explication of one man's China Crisis view comes from another blog I follow regularly:
http://brontecapital.blogspot.com.au/2012/06/macroeconomics-of-chinese-kleptocracy.html

kyle8

Idiots writing for the NY Times told us only a few years ago how backward we were and how much we could learn from China.

Yeah, not so much.

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