Sunday, June 14, 2009

More On China - Bust to Bubbles

A very interesting read in Shanghi Published China Stakes. Basically the economy is slowing but bubbles are devloping in real estate and possibly the stock market due to the huge liqudiity boost. World governments have been able to stop what is natural, a long needed system flushing, for that which is unnatural. This of course also occurred in 2003 and lasted until 2007 before the problems reared their ugly heads worse than before. My guess the same will occur again but will not take four years for markets to realize this.

There's ice on the export side, while there's flame on the real estate market side, and China's effort to create internal demand is being distorted. China's economic stimulus, which is bulldozing ahead, is causing problems for China's economic recovery. Manufacturing is steadily declining, employment and consumption growth are weak, but bubbles are beginning to gather in the real estate industry.

and more protectionism

Compared with figures of previous months, May's decline was steeper. Foreign trade rebounded a bit in the first quarter and exporters gained some orders. But new orders have decreased since, and the second half of this year is unlikely to see a recovery in overall foreign trade.

Policies to stabilize external demand are set to be implemented since the May foreign trade figures have been released. In the short-term, the export tax rebate ratio for 2600 goods has been raised to help maintain the share of “made in China” in overseas markets.


But go figure--China's real estate market is booming along with its stock market. The March rebound in the real estate market has developed into a luxurious banquet for the property industry.

The latest National Bureau of Statistics figures show that between January and May China's commercial housing sales reached 24,644 square meters, a leap of 25.5%, year on year, with residential housing sales growing 26.7%.

The real estate market boom is led mainly by a liquidity surplus due to a huge increase in credit. The Obama administration is printing money to beat the band, over $2 trillion. China's currency placement is also very high. At the end of April, M2 growth reached 25.95%, the highest level in the past 10 years.

No comments: