Is China Teetering On Collapse?

[Annie]

Is China headed toward collapse? - Eamon Javers - POLITICO.com

This is disquieting:

...That’s one vision of the future.

But there’s a growing group of market professionals who see a different picture altogether. These self-styled China bears take the less popular view: that the much-vaunted Chinese economic miracle is nothing but a paper dragon. In fact, they argue that the Chinese have dangerously overheated their economy, building malls, luxury stores and infrastructure for which there is almost no demand, and that the entire system is teetering toward collapse.

A Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt and provoking unknown political changes inside the Chinese regime.

The China bears could be dismissed as a bunch of cranks and grumps except for one member of the group: hedge fund investor Jim Chanos.

Chanos, a billionaire, is the founder of the investment firm Kynikos Associates and a famous short seller — an investor who scrutinizes companies looking for hidden flaws and then bets against those firms in the market.

His most famous call came in 2001, when Chanos was one of the first to figure out that the accounting numbers presented to the public by Enron were pure fiction. Chanos began contacting Wall Street investment houses that were touting Enron’s stock. “We were struck by how many of them conceded that there was no way to analyze Enron but that investing in Enron was, instead, a ‘trust me’ story,” Chanos told a congressional committee in 2002.

Now, Chanos says he has found another “trust me” story: China. And he is moving to short the entire nation’s economy. Washington policymakers would do well to understand his argument, because if he’s right, the consequences will be felt here. ...

 

[eagleseven]

Is China headed toward collapse? - Eamon Javers - POLITICO.com

The Chinese, with their unbridled capitalistic expansion propelled by a system they still refer to as “socialism with Chinese characteristics,” are still thriving, though, with annual gross domestic product growth of 8.9 percent in the third quarter and a domestic consumer market just starting to flex its enormous muscles.

That’s prompted some cheerleading from U.S. officials, who want to see those Chinese consumers begin to pick up the slack in the global economy — a theme President Barack Obama and his delegation are certain to bring up during next week’s visit to China.

“Purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past,” Treasury Secretary Timothy Geithner said during a trip to Beijing this spring. “In China, ... growth that is sustainable will require a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption.”

That’s one vision of the future.

But there’s a growing group of market professionals who see a different picture altogether. These self-styled China bears take the less popular view: that the much-vaunted Chinese economic miracle is nothing but a paper dragon. In fact, they argue that the Chinese have dangerously overheated their economy, building malls, luxury stores and infrastructure for which there is almost no demand, and that the entire system is teetering toward collapse.

A Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt and provoking unknown political changes inside the Chinese regime.

The China bears could be dismissed as a bunch of cranks and grumps except for one member of the group: hedge fund investor Jim Chanos.

Interesting proposition, and worrisome. I cannot say I would be surprised if the Chinese government was cooking its books, as it is responsible only to itself. Who would risk re-education to challenge Chinese government officials?

 

[Neubarth]

They have ordered their people to consume. Every home needs two television sets and three radios. Eventually the Chinese will have no further capacity to buy. Meanwhile China is shipping less and less product to American markets.

 

[manu1959]

if china collapses our debt to them colappses with it.....total write offf.....one has to wonder if this economic "war" was created by the poers that be for just such a purpose....

the us took out the soviet union in a similar fashion....

 

[Said1]

They also spent heavily on developing 100's of new cities to support more industrial growth, drawing people out of rural areas (hopes of that is). They've also permitted 'sex shops' that now outnumber Starbucks in most major, western cities. So, I guess their is some real consumption of (government induced) commercial 'stuff'.

 

[Toro]

It is possible.

China has excess capacity in manufacturing and a rotten financial system.

 

[Modbert]

It is possible.

China has excess capacity in manufacturing and a rotten financial system.

And what would happen to our debt to them?

 

[Oddball]

It is possible.

China has excess capacity in manufacturing and a rotten financial system.

And what would happen to our debt to them?

What happened to the American debt to Japan during the lost decade?

*poof*

 

[Said1]

Duplicate thread. See China=Enron.

Yes....MERGED.

~Dude

 

[Toro]

It is possible.

China has excess capacity in manufacturing and a rotten financial system.

And what would happen to our debt to them?

Nothing.

Why would we repudiate our own debt if they collapsed?

 

[Ringel05]

I would be more concerned about the more hard core inner circle reaction in China.

 

[Oddball]

It is possible.

China has excess capacity in manufacturing and a rotten financial system.

And what would happen to our debt to them?

Nothing.

Why would we repudiate our own debt if they collapsed?

Indeed. They'd liquidate it for pennies on the dollar just for the cash flow.

Welcome to the fiat currency roulette wheel.

 

[manu1959]

I would be more concerned about the more hard core inner circle reaction in China.

remeber the collapse of the ussr.....like that only with lkess tv coverage and more blood....

 

[Navy1960]

I would defer to the financial experts on this one, however that seems to be an elusive critter these day's. That said, as China holds vast amounts of US debt a collapse of it's economy would spell disaster for the US Dollar in my opinion. Not only that, all the borrowed money that the Govt. hopes to borrow from China to fund its more recent engineering projects, both social, and physical would dry up. We as a nation have sold ourselves to China for years and their financial collapse would cause a huge impact on this nations economy for years to come. Again, that is from an observers standpoint as I tend to not be in favor of single sourcing your nations interest to one nation as we have done with China for years. On a side-note, how tragic, where would Wal-Mart get it's cheap products from then? Can you say , India.

 

[Toro]

And what would happen to our debt to them?

Nothing.

Why would we repudiate our own debt if they collapsed?

Indeed. They'd liquidate it for pennies on the dollar just for the cash flow.

Welcome to the fiat currency roulette wheel.

As long as the US is paying off its debt, China will get 100 cents on the dollar.

Meanwhile, I own a lot of gold.

 

[The_Halfmoon]

what a coincidence that this thread was here, I was going to make one just now. I was watching this, and felt it reflected the reality of China. A country of enormous human capital, intelligent people, yet:

[ame=http://www.youtube.com/watch?v=0h7V3Twb-Qk]YouTube - China's empty city - 10 Nov 09[/ame]

Central planning shows its ugly head yet again. In this case, central planning mixed with the fear of local officials who cannot face up to reporting low growth numbers.