>>internal consumption is still moribund
Do you ever go to the supermarkets? Every time I go to eat outside in the evening at the mall, I have to wait a line of at least 5 numbers to get a table, and I live in the suburbs, very far from downtown.
Everything is crowded in China, what does that prove? That consumption of food happens is of no doubt, but you have to save like crazy for everything else. I have a few years of salary saved up in the bank since there is absolutely nothing to buy except overpriced real estate and cars (but then I'd have to join the lottery for a plate).
Taobao, 360.com and the likes are selling Billions and Billions trough the internet, massive amount of internet consumption, home appliances, electronics, clothes. Thats not food nor real state and cars
Every year , for the last 20 years, many articles say that we can be sure of the imminent Chinese economy collapse. Then every year they are proven wrong. This is just one more of these articles. The guys have no idea what they are talking about. The education effort is as huge as the infrastructure building effort, and it will bring its benefits. At some point the growing will slow down; at some point it will be 1% yearly growth; but a political collapse is very unlikely, and economic collapse is even more unlikely.
Every year, for the last 20 years, many articles say that we can be sure of an imminent housing crash. Then every year they are proven wrong. This is just one more of these articles.
... Bubbles are bubbles until they pop. A lot of infrastructure in China is under utilized, and let's not even get started on empty shopping malls and apartment buildings, even here in Beijing!
Whether the government can pull off a soft landing is up for debate, but every year with people, local governments, and companies become more leveraged, not less, I think a hard landing is more likely.
Now, if that happens, this doesn't necessarily mean that the government collapses, but many of the bandits who are making out on this have gotten their money out of the country, and a correction is more likely to negative effect those who didn't really benefit in the gorging. And if that happens, the CCP (many whose relatives have already fled abroad) is going to be facing a lot of pissed off nongming.
The Chinese internal economy is not as robust as its export economy, and shifting the economy to one based on consumption is an important goal to making it actually healthy. Right now, people just save or invest...and the investments are limited to some shady financial products and...real estate.
>>and the investments are limited to some shady financial products and...real estate. This is in Beijing , or Hebei, Henan and the 3 northern provinces. At the Pearl River Delta and the Shanghai-Zhejiang-Jiangsu triangle the investment is in production.
People from Wenzhou basically invented highly leveraged real estate speculation.
Also, as a normal person without guanxi, you can't really get access to the sure bet industrial investments, and participating in shadow lending is very risky.
chinese dont live on credit like americans, they live for saving. The financial market is slightly more regulated than the american financial market, aswell.
Exactly. Most of the money is kept in saving accounts with interest rates that are far below inflation. And what do you think the banks are doing with that money?
China is in fact buried in a massive pile of debt, from corporate to muni to personal, that they will never be able to climb out from under. And they've had to pile on ever larger amounts of debt just to keep faking the 'growth.' The notion of China being the land of savings and low debt is completely a myth.
"In the meantime, some investors are increasingly alarmed by the speed at which local governments are piling on debt to pay for public works. China's state auditor said in its report on Monday that local governments had total outstanding debt of 17.9 trillion yuan ($2.96 trillion), including contingent liabilities and debt guarantees, at the end of June."
"A report by Nomura said Thursday that Chinese municipal debt, a focal point of major concern about the country’s economy, had grown at an alarming 39 percent clip in recent years."
"China's overall debt-to-GDP ratio has sprung to over 200% from about 120% in five years. Most of this is from local governments and state-supported companies."
China's corporations are drowning in debt, at 151% debt to GDP ratio, the highest basically in the major industrial world. Twice as high as America's ratio.
For the past 20 years I've been hearing how China was going to take over the United States in everything. Invasion of Taiwan would happen whenever they wanted. I've never heard anyone say their economy was about to imminently collapse.
I'm surprised any one thought that China's "bailout" was doing anything more than kicking the can down the road? It is the end of the road now, and they get to deal with unserviceable debt. There are many options. All are ugly in unique ways. For who and when are the questions left undetermined.
It's a mistake to believe that either China's will continue along uninterrupted or that it will fall into severe crisis. The reality is that China has a strong economy AND also a very flawed and troubled economy (India has similar problems but in a different way).
The result will probably be that China's growth will at some point stall out before reaching developed world levels and they will probably be faced with some manner of serious problems at a level less than countrywide existential crisis.
Also, as to "predictions being proven wrong", remember that every year during the 2000s many people predicted that the housing market would implode and lead to a major economic crisis. They were "proven wrong" every year until it actually happened.
Last time I checked, China had 1 Trillion dollars in reserves. Chinese people is not living on credit cards, actually quite the opposite, they save a lot, even the little waitress at the cheap restaurant has a lot of savings. Every year, at spring festival, hundreds of millions of young chinese give their savings to their parents to keep, and those old people can save! I dont know where is the debt guys are talking about.
The US economy was badly hurt by household debt because household spending fuels the US economy, this is not the case for the Chinese economy. An 8x increase in corporate debt in China in the last 5 years means something in an economy driven by industrial production instead of individual consumption. I do not know exactly what it means but I suspect there is some grounds for believing it may not be entirely good.
Chinese households might be less inclined to take on debt, but they've still managed to rack up about 30+% of GDP worth, so they are working on it.
You can lose your savings from a bank default, this happened to some weak banks in the US. You go to withdraw your money it is not there.
You can lose your saving from currency devaluation. In order to pay off debt, a government can issue new currency (debt denominated in its own currency; in Eurozone countries they can only raise taxes and cut spending to pay off debt.) Your savings don't matter because there is so much more money. An old unit of currency is equal to new units.
If I was Chinese, I would not be too concerned as long as I did not have liabilities for my business or money deposited in a bad bank. If yes to either of these, you are at risk of losing everything.
China has $3 trillion in reserves, and it's completely meaningless when stacked against their rapidly expanding pile of debt. China is one of the most indebted nations, and to keep their GDP growth going they have to keep adding ever larger sums of debt. The amount of growth they get from $1 of capital has crashed the last six years. It's obvious how it's going to end: either in a very long period of dire stagnation, or crash.
If someone say it for long enough, they're bound to be right one day. It's the same about the decline of the US.
All we can do is judge them on a case-by-case basis.
In this case, it's really hard to judge because the threat, similar to the US credit crisis, is hard to measure. China has a really sizable foreign reserve that some people think will buffer any economic crisis. However, some estimates of the shadow banking system puts it well beyond its reserves. That said, not every loan in the shadow banking system will go bad. It just means the loans were made off the books. One can reasonably assume that the lender did his work and made loans that have a decent chance of success. Also, I don't know what falls under some of the definitions of shadow banking. The Chinese have been loaning each other large sums of money for generations. This "tradition" is one of the theories put forth in the rise of overseas Chinese communities and their dominance in business in those areas. Anyways, my point is that it's not all doom and gloom. The threat is there but don't panic yet.
The problem with leverage is that you don't need a 100% failure to be wiped out. This is why the US crises was not very surprising, the investment banks had upwards of 1:30 leverage ratios. Similar things were happening to real estate investors.
So no, not all of the loans will go bad. But, some go bad. First prices stop growing. No growth? Why borrow to buy? Next prices drop, and then suddenly a lot of loans that should have been ok are worth far more than the underlying assets. Then it is just a big mess.
Think of a credit bubble as a game of musical chairs. The people who borrow money at the end always lose (also the ones that lend money.)
BBC is not blocked, at least here in Beijing or other big cities. Are you in the countryside of Northern China? I advice to try www.myssh.cc , very fast and very cheap (2 USD a month), it unblocks everything, but then you have to turn it off when you want to watch all the free streaming movies, TV series, and music easy available inside the great wall.
It is blocked on my home ISP (telecom?) and CMCC and Unicom in Beijing; I just checked and got the dreaded invalid argument message. Blocking isn't exactly consistent between ISPs, but when three of the big ones block something, I'm assuming this is at least a citywide block, what ISP are you using? It could just be a misconfigured selective block, it is a weird error for a true block.
Every way of jumping the wall winds up not working 2 months after you've bought a year of service. I've giving up on trying.
Also the planes always have at least 30 minutes delay before take-off (here in China),and yes, airports are usually far from the Downtown. Anyway, Trains are much more comfortable, less stressing, you can take more luggage, you can sit at the restaurant, have internet with a 3G stick, play cards and make friends, many trains have a smoking area (in China). I prefer trains over planes every time.
Not sure that I'd consider 'many trains have a smoking area' as a good thing. Last year, I spent two weeks travelling around China via trains, and without a doubt the most annoying part of the experience was the rampant second hand smoke wafting throughout the entire train. While there are designated 'smoking areas' on the trains, they don't work so well when the train staff keep all the doors wide open all the time. And I tried closing them a few times, and less than a few minutes later some 'helpful' train car attendant had re-opened the door. I'm pretty sure I increased my likelihood of contracting lung cancer by a few percentage points from the two weeks that I spent on Chinese trains (not to mention the polluted air throughout the country).
I have been living in China for 6 years and last time I counted, I had already 1250 hours of travel time in Chinese trains. You can go to Lhasa, on the Himalaya, from Beijing by train. A friend of mine is going to Moscow from Beijing next week. My hours are increasing slower, now that high-speed trains are popping everywhere. Most high-speed are new paths, so little villages in middle of nowhere that had nothing, now suddenly have stunning modern mini Train Stations with High-speed trains (300 km/h cruising speed) stopping there. It's amazing. Many people say , in my home country Brazil, where trains are virtually non-existent, that a main reason our
previous governments didn't build tracks was the lobby of Big Truck makers and Big Oil, that profit from all the transport being made by roads.
These little villages in the middle of nowhere typically have 1+ million people my wife's hometown, chenzhou Hunan, is connected on the Guangzhou-Changsha line. It's a small town by Chinese standards but would be huge by American standards. They are even getting a Starbucks soon...times are changing quickly.
Given that Transsib is not HSR, Beijing-Moscow is going to take around 7 days by train. It's not a pleasant trip. Especially compared to 7-8 hours by plane.
I still use the tiny lightning fast Macromedia Flash 4 to make simple animations, when its just simple animations, without all the script power, features and Photoshop integration you get with the Adobe 2 Gb in disk elephant. I used to run this Flash 4 in a Pentium 133hz with only 16 MB RAM and it wasn't that slow. I was waiting, wondering why didn't someone bring something like that for HTML5 yet, and Finally it is here! Thank you .
I noticed that when changing from one chapter page to another, it loads much faster than the original rails tutorial, that takes forever. Nice improvement, still note a little latency though. It will be nice for people to study the Rails Tutorial Book when published on Softcover's new platform. Is going to happen?
There is already a version of the Rails Tutorial book that builds on Softcover, and in the coming weeks I plan to move the full tutorial over to the Softcover platform (taking care to preserve things like legacy download links). Watch for an announcement once the change-over is complete.
Congratulations! Will use it. By the way, thank you very much, Mr. Hartl, for the rails tutorial. It was life changing for me, a former completely non-tech guy, now running my customs brokerage business trough a collaborative database tool horribly coded by me myself :)
edit: misspell
