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Will China shake the world again?

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Will China shake the world again?

Unread postby dolanbaker » Tue 18 Feb 2014, 16:12:55

http://www.bbc.co.uk/news/business-26225205

Unless you are an aficionado of the great moments of Chinese Communist history, you probably won't have heard of Wuhan (it is the site of Chairman Mao's legendary swim across the Yangtze).

But perhaps more than any other Chinese city, it tells the story of how China's remarkable three decades of modernisation and enrichment, its economic miracle, is apparently drawing to a close, and why there is a serious risk of a calamitous crash.

In Wuhan I interviewed a mayor, Tang Liangzhi, whose funds and power would make London's mayor, Boris Johnson, feel sick with envy. He is spending £200bn over five years on a redevelopment plan whose aim is to make Wuhan - which already has a population of 10 million - into a world mega city and a serious challenger to Shanghai as China's second city.

The rate of infrastructure spending in Wuhan alone is comparable to the UK's entire expenditure on renewing and improving the fabric of the country. In this single city, hundreds of apartment blocks, ring roads, bridges, railways, a complete subway system and a second international airport are all being constructed.


Could China's economy be about to "stall", they appear to be stomping hard on the breaks!

http://www.bbc.co.uk/news/business-26236593
China's central bank has removed nearly $8bn (£4.7bn) from the money markets in a bid to control the amount of credit in the country's financial system.

According to reports, the People's Bank of China (PBOC) did so by issuing 14-day forward bond repurchase agreements, also known as forward repos.

It is the first time since June the PBOC has used forward repos, and comes after China released unusually strong economic data earlier this year.

Chinese stocks fell in Shanghai.

A trader at a Chinese commercial bank in Shanghai told the Reuters news agency that the move "sent a strong signal to the markets that the central bank is not letting liquidity ease".
Ronald Coase, Nobel Economic Sciences, said in 1991 “If we torture the data long enough, it will confess.”
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Re: Will China shake the world again?

Unread postby Plantagenet » Tue 18 Feb 2014, 16:18:59

China is still growing at 7% a year. No doubt they will crash at some point, but barring a major uptick in oil prices they can probably keep their boom going for a while longer. 8)
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Re: Will China shake the world again?

Unread postby Sixstrings » Tue 18 Feb 2014, 16:41:15

Plantagenet wrote:China is still growing at 7% a year. No doubt they will crash at some point, but barring a major uptick in oil prices they can probably keep their boom going for a while longer. 8)


Will they "crash," at all?

Asians are different. They work very hard. They save. Japan has been in economic duldrums forever now, supposedly, yet take a look at the place -- it's still a powerhouse, it's modern and people working their fingers to the bone.

Chinese are also more tolerant of hard times. I don't think they'll "crash." What they really NEED though is to begin shifting toward modern democracy and liberilization. That's why they have more engineers than we do but they can't think outside the box and we out-innovate them.

*If* they can make the next transition, then this will be the Chinese century. And the US has to keep competing. We've got guys like Elon Musk doing what nobody in China could. Also, we can't turn our country into a massive pig farm to feed China. Let that business go to South America or somewhere -- we don't want to wind up a Chinese satellite raw goods supplier.

Our biggest threat, from someone most like us, are the Russians. A Russian can out-American an American. Russians are creative and can innovate if you give them freedom. The more Russia goes Western the more they can compete with us -- strategically, we're lucky that Putin is holding them back.
Last edited by Sixstrings on Tue 18 Feb 2014, 16:55:35, edited 2 times in total.
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Re: Will China shake the world again?

Unread postby Tanada » Tue 18 Feb 2014, 16:48:55

I find myself agreeing with Plant on this one, they have weathered $110.00 oil easily and are now the worlds number 2 importer, right behind the USA. Given internal demand for consumer goods they could hang on for months or even years if the rest of us went into major recession and stopped buying their products.
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Re: Will China shake the world again?

Unread postby dolanbaker » Tue 18 Feb 2014, 17:34:08

I just watched the BBC programme about the Chinese "miracle" after the 2008 crash and it was based on a case of the state bank being ordered to "open the wallet" which resulted in record lending on a scale unparalleled anywhere else!

It's a financial "red queen" predicament that the Chinese are currently in, any attempt to slow down the growth will result in mass unemployment and a possible backlash and instability.

One possible solution would be to get Chinese spending/consumption to increase (the Chinese like to save), but short of severe taxation of savings (for pensions etc) that would be difficult to achieve. As much of Chinese savings are in property a crash would be disastrous for much of the population.
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Re: Will China shake the world again?

Unread postby dolanbaker » Tue 18 Feb 2014, 17:36:07

Tanada wrote:I find myself agreeing with Plant on this one, they have weathered $110.00 oil easily and are now the worlds number 2 importer, right behind the USA. Given internal demand for consumer goods they could hang on for months or even years if the rest of us went into major recession and stopped buying their products.

Any future Chinese recession will be "made in China" and may benefit the west by reducing the costs of many key commodities.
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Re: Will China shake the world again?

Unread postby Keith_McClary » Tue 18 Feb 2014, 18:41:30

dolanbaker wrote:
...He is spending £200bn over five years on a redevelopment plan whose aim is to make Wuhan...

Could China's economy be about to "stall", they appear to be stomping hard on the breaks!
China's central bank has removed nearly $8bn (£4.7bn) ...It is the first time since June the PBOC has used forward repos
Seems like a drop in the bucket considering what one city is spending.
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Re: Will China shake the world again?

Unread postby Peak_Yeast » Tue 18 Feb 2014, 18:44:21

China is already a major player in the world.

With a growth of 7% - and a doubling time of 10 years...

Question: Does anyone think that China can double its resource consumption, production and polution without destroying the rest of the wolrd (and itself)?

It's current level of polution is not exactly beneficial to the country or its internal food production. Nor is its current level of resource consumption exactly without creating troubles in the rest of the world.

Those resources will probably have to come out of other countries consumption - which means these countries will probably have less to purchase chinese good with.

If the growth has to continue at 7% or higher - it will increasingly only be in the fantasy world of financial transactions.
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Re: Will China shake the world again?

Unread postby westexas » Tue 18 Feb 2014, 19:35:48

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Re: Will China shake the world again?

Unread postby americandream » Tue 18 Feb 2014, 21:39:33

These countries will follow the same developmental route to full consumerism as did the West (Ireland in the '80's was a basket case, not so any more where consumerism has fully embedded) and we will live to rue to day, as a planet.
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Re: Will China shake the world again?

Unread postby Loki » Tue 18 Feb 2014, 22:32:49

dolanbaker wrote:
Tanada wrote:I find myself agreeing with Plant on this one, they have weathered $110.00 oil easily and are now the worlds number 2 importer, right behind the USA. Given internal demand for consumer goods they could hang on for months or even years if the rest of us went into major recession and stopped buying their products.

Any future Chinese recession will be "made in China" and may benefit the west by reducing the costs of many key commodities.

If some of the financial reports about China's credit practices are true, they may be looking at a balance sheet recession, i.e., debt deflation. Those reduced commodity prices may be in the form of a deflationary spiral of the global economy.
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Re: Will China shake the world again?

Unread postby Sixstrings » Wed 19 Feb 2014, 17:34:23

westexas wrote:A Zerohedge item linked on Drudge about China dumping US debt in December:


http://www.zerohedge.com/news/2014-02-18/china-sells-second-largest-amount-us-treasurys-december-and-guess-who-comes-rescue


Interesting. China and Japan sold bonds off, and the Europeans saved us on that one.

This is why we need allies. This is why need to keep Europe. And keep Japan (which can be counted on if push comes to shove). This is why it was insane for this administration to give Saudi Arabia to Russia and China, after a century of American influence there.

Cold war ain't really over guys. We need these allies.
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Re: Will China shake the world again?

Unread postby americandream » Wed 19 Feb 2014, 18:53:20

Sixstrings wrote:
westexas wrote:A Zerohedge item linked on Drudge about China dumping US debt in December:


http://www.zerohedge.com/news/2014-02-18/china-sells-second-largest-amount-us-treasurys-december-and-guess-who-comes-rescue


Interesting. China and Japan sold bonds off, and the Europeans saved us on that one.

This is why we need allies. This is why need to keep Europe. And keep Japan (which can be counted on if push comes to shove). This is why it was insane for this administration to give Saudi Arabia to Russia and China, after a century of American influence there.

Cold war ain't really over guys. We need these allies.


China gets the oil to manufacture the goods in your mall. This was probably the handiwork of the American business roundtable or your equivalent lobbying the US government to pull strings with SA.

This cold war is in your working class mind.
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Re: Will China shake the world again?

Unread postby Sixstrings » Wed 19 Feb 2014, 20:09:12

americandream wrote:This cold war is in your working class mind.


That ZH article illustrated the very scenario I've speculated about before.

China dumping our bonds. So WTF do we do. Well, we need allies we can get on the horn with and have them buy bonds. This is reality AD.

When push comes to shove we can also just print money of course and buy our own bonds (monetization). We can do this only because the dollar is global reserve currency -- coin of the realm.

Half our dollars are held overseas. And the reality is that the US spends on the military more than the rest of the world combined, and these allies we have buy our bonds to fund that, and in reciprocation we're supposed to be the big muscle in this alliance. Losing Saudi Arabia is losing an asset with very deep pockets -- it was stupid.

One may not like the situation of being global empire here, but it is what it is. Ancient Rome couldn't just shut off from the empire and everything be okay, either.
Last edited by Sixstrings on Wed 19 Feb 2014, 20:17:18, edited 1 time in total.
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Re: Will China shake the world again?

Unread postby americandream » Wed 19 Feb 2014, 20:14:33

@ six

ZH has a minimal knowledge of capitalism and basically pushes a confused nationalist libertarianism (very confused).
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Re: Will China shake the world again?

Unread postby Sixstrings » Wed 19 Feb 2014, 20:20:06

americandream wrote:ZH has a minimal knowledge of capitalism and basically pushes a confused nationalist libertarianism (very confused).


They're traders. China and Japan sold off bonds. But it wasn't a problem because *Belgium* bought bonds, which is really the EU. That likely means somebody made a phone call to the Euro central bank.

AD, there's how you would like the world to be and then there is how the world is -- US needs to be looking out for its national security, and our national security is tied into maintaining dollar as global reserve (or very carefully managing the pullback from that).

If we start losing allies then there will be nobody for the Treasury Sec to call to get them to buy bonds, if China does a dump.

Ergo, if Obama is causing us to lose allies then the position of the US is a lot weaker than before. There needs to be a very darn good reason for major estrangement from long term allies -- over half a century, a century in some cases.
Last edited by Sixstrings on Wed 19 Feb 2014, 20:23:26, edited 1 time in total.
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Re: Will China shake the world again?

Unread postby americandream » Wed 19 Feb 2014, 20:21:51

The "we" that matter in America own most of its wealth and steer government policy. You can huff and puff all you like, this will not alter things one iota.
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Re: Will China shake the world again?

Unread postby phaster » Wed 19 Feb 2014, 20:24:16

Plantagenet wrote:China is still growing at 7% a year. No doubt they will crash at some point, but barring a major uptick in oil prices they can probably keep their boom going for a while longer. 8)


seem to recall reading a few weeks ago an article that stated, "fitch" estimated china pushed the economy forward these past couple of years on credit in the 20 to 24 trillion dollar range

and some of that was spent on "real estate" (which just to remind ya all caused the economy to fall)

http://www.cbsnews.com/videos/chinas-re ... te-bubble/

personally I'm not so much worried about oil prices, I am worried what happens when the public at large realizes the economy as structured is unsustainable and the bill has to be paid somehow (there is going to be some interesting social adjustments and expectations that are going to have to happen)
I'm 99.999% sure that unsustainable conspicuous consumption & economic mismanagement will result with a proverbial hell on earth! But the damage can be reversed if we acknowledge the problem, then use the scientific method to fix the problem.

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Re: Will China shake the world again?

Unread postby Ibon » Wed 19 Feb 2014, 20:28:26

Sixstrings wrote: There needs to be a very darn good reason for major estrangement from long term allies -- over half a century, a century in some cases.


We should discard the naivete of a more innocent previous generation of Americans and understand that every decision our government takes, no matter how incompetent it may seem, has a geo strategical think tank behind the scenes. If it appears to be a decision that hurts the middle class that may very well be part of the plan for it is not the common Joe who is being defended but rather those in control.

We really do have some serious waking up to do.
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Re: Will China shake the world again?

Unread postby Sixstrings » Wed 19 Feb 2014, 20:29:44

americandream wrote:The "we" that matter in America own most of its wealth and steer government policy. You can huff and puff all you like, this will not alter things one iota.


True enough..

But if it costs $20 for bread becasue China seriously dumps bonds and say we've pissed off the Europeans and say we've let Japan twist in the wind and they're not friendly with us anymore either, and we done lost the Saudis a long time ago..

Then standing in the Walmart looking at that $20 loaf of bread I'd be in that "we" too, as far as consequences go. I don't like the 1% and banksters in charge either, but I know the realities here, and I have US dollars in my pocket and I know what could happen to their value if the paradigm gets screwed up.
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