Your Account
Community
Topics (Upcoming)
More |
View story
Trapped Inside A Property Bubble
http://english.caing.com/2010-01-10/100106991.html
Submitted by
cij
6 months, 2 weeks, 1 day, 23 hours agoAn excellent article by Andy Xie. Andy Xie reckons that by 2012, inflation will rear its ugly head in China and then the property bubble will burst.
#1 - By PeteD, 6 months, 1 week, 1 day, 17 hours ago.
Wow, this is a great article. I have some (many) comments...
So many great quotes, but how about this one: Sound like any country we know? Although I guess the Australia debarcle is a bit obvious to us by now. 2) "The dollar has bottomed. The Fed will begin raising interest rates in 2010."
Really? What are your thoughts on that CIJ? Will the Fed raise rates? Does raising them to 1% really count? Japan didn't raise their rates. Also, raising rates brings a whole bunch of further issues to the US. It could certainly aggravate their subprime issues, especially with all these resets happening in 2010. But...if the Fed did raise rates and the USD strengthened (I am assuming it would?), wouldn't that mess up China's peg to the USD because they'd have to let the Yuan appreciate aswell. Which would, theoretically, hurt China's exports to all countries other than the US (who would be reducing imports already). Hmmm, I dunno about all that. Too many conclusions to jump to.
This is interesting: So appreciating the Yuan would not be so beneficial after all? 4) "China has been trying to promote consumption for a decade. However, consumption's share of GDP has declined annually. The reason is the policy environment has been squeezing China's nascent middle class through high property and auto prices along with high income tax rates." Well that's something I didn't know. What do you think about that one CIJ? 5) "Society is drifting toward a small, super-rich minority along with a small -- possibly less than 20 percent of the population – yet heavily burdened middle class, and a vast, low-income majority. Such an income structure cannot support a balanced economy, forcing export dependence." Andy is just ripping apart that consumption model with a well articulated article. How much of this is his opinion and how much is reality? I am bearish on China, but Andy seems to be refuting all of the foundations that the China 'sustainable' growth story is built upon. He is certainly showing which side of that story he is taking. 6) "China's property market is creating winners and losers based on timing. All other factors – including education and experience -- have been marginalized as the economy rewards speculators. And as more play the game, the speculator ranks rise and fewer people work, perhaps contributing to a labor shortage." This sounds a lot like Australia too. But, is he serious about a labour shortage? Skilled labour perhaps, but a generalised labour shortage, surely not? It seems so absurd, but I wouldn't know the truth of the matter anyway. 7) "Such manipulation has created a speculative psychology that theorizes the government would never let prices fall. When speculators think prices won't fall, speculative demand lasts as long as banks have the liquidity" I guess this is true. I think about how this works in Australia, and it seems to be ringing quite true. And it makes me think that property prices in Australia could turn quite quickly without the speculation. But this article is about China :) 8) "The killer is inflation driven by a surge in money printing. The average lag between currency creation and inflation is 18 months in the United States. China's lag could be two years since the government uses subsidies to suppress inflation. By 2012, China could experience 1990s-like inflation. And that's when the property bubble will probably burst." Final paragraph, says everything really. Interesting opinion on the QE/lag. So that means the US is in for inflation this year? Inflation, deflation...flation of some sort. Price volatility. Inflation vs deflation, i don't think they play by exactly the same rules. Surely you could have deflation in food prices and inflation in property prices at the same time? Has someone cursed us "may we live in interesting times?" ;) #2 - By PeteD, 6 months, 1 week, 1 day, 17 hours ago.
I think next time someone tells me China is Australia's saviour, I will ask them 'why?'. 'What is it about China that ensures this?'
The most common argument I have come across is that 1.3 billion people is a lot of consumption. But if that is the sole argument then I'll know that person is speculating. #3 - By cij, 6 months, 1 week, 1 day, 2 hours ago.
Will write an article on Sunday to answer your comments on Andy's article. Very good food for thought.
|
