Will China's Credit Squeeze Burst the Mother of All Bubbles?
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  • Kenny

    The Mother of All Bubbles might be U.S. Treasury bond market.

  • Luke Lea

    Why investors (or economists) ever thought they could trust data coming out of China — one of the most corrupt societies on earth — is beyond me.

  • Jim.

    So why in the world aren’t the Chinese more interested in cultivating a domestic consumer market? It seems to me that (as long as our raw materials and energy production keep expanding) that would be the solution for everyone.

  • JLK

    Dr Mead

    This kind of warning about China needs to be repeated over and over. Too many people including “shrewd” industrial managers and investors think of China as one great never-ending oppportunity, ignoring the many head winds facing their economy.(Sound familiar like the US in 2005-06?)

    Currently 50% of investment capital has gone to manufacturing and only 35% to personal consumption. As you have said when the demand for Chinese widgets slacks off or hits the wall because of recession and/or oversupply what happens then? The Chinese consumer, bound by thousands of years of tradition AND a lousy social welfare system ain’t gonna lower his savings rate as quickly as would be needed to save the day by rebalancing the economy.

    Combine reduced sales and profitability and tightening credit can shake the whole economy at its roots. Their strategy of bailing the “Big Four” banks out of periodic zombie loan crises by transferring the losers to “bad banks” then funding those banks with their huge capital reserves won’t work forever.

    If the size of the zombies, especially in housing, (65 mil empties according to Fitch and that number is not a typo) overwhelms their reserves, then what happens? Do they print Renminbi? Call in bond holdings from the US and other places?

    And most dangerous for the government, if growth slows,stops or goes in reverse (I mean the real numbers not the Greek Trojan Horses) then civil unrest could move to chaos.

    China is a great dynamic country but they still have a lot to learn about running an economy for the long term.

  • Mrs. Davis

    Why we let Red China in the WTO is beyond me. Well, actually not.

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