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China's Subprime Crisis Is Here

bloomberg.com

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Re: China's Subprime Crisis Is Here

#11

Post by Pyxl101 »

narrator wrote: post #9

Ahhh the old' China crisis again! The dog that didn't bark. The Charlie Brown football that never got kicked. The constant and unending crisis that is on its way any day now. As I have explained over the years in many previous comments, China's banking system is partially privatized central planning, the government prints it's own money. Thus, when there is a credit crisis the government just recapitalizes the banks…

Would you mind changing the links to the HN threads rather than the original news articles? I think that will better illustrate your point. But, if those threads were all zero comments, then I'm not sure they count as memory lane. Nevertheless, this does sound a bit like "suits make a corporate comeback".

Re: China's Subprime Crisis Is Here

#12

Post by obblekk »

dh997 wrote: post #4
obblekk wrote: post #2

This doesn't seem like a particularly compelling argument. Bad loan volumes have risen, but not above historical highs. As a percentage of total debt, the article says bad debt is at 1.67%. This is up 51% from 1.25% in the last year. Considering the amount of margin that's been wiped out as a result of the stock bubble popping, this doesn't seem terrible. In addition, it doesn't seem like this rate is accelerating (s…

Isn't the bigger issues China's structural draconian limits to freer movement of capital, external investment, the imaginary/real value of ghost cities and scale of holding illiquid foreign debt?

I think the bigger issue is that China faces labor competition on the lower end of the unskilled market from South East Asia and India and is trying to enter the lower end of the skilled labor market but finding out that the Americans, Europeans, and Israelis are fairly competitive.

I'm generalizing and neither list of countries is exhaustive.

Re: China's Subprime Crisis Is Here

#13

Post by tyre »

obblekk wrote: post #7
dh997 wrote: post #4

Earlier quoted context omitted.

Isn't the bigger issues China's structural draconian limits to freer movement of capital, external investment, the imaginary/real value of ghost cities and scale of holding illiquid foreign debt?

One by one: 1. Freer movement of capital. This is a false herring in my opinion. Virtually no countries outside the US/EU offer completely free movement of money. The thing that matters is whether this prevents foreign capital investment (because people are scared of not being able to get their money back). In China, I don't think it does based on the last few decades of foreign investment. 2. External investment. As…

A few counterpoints.

From your original comment

> In addition, it doesn't seem like this rate is accelerating (since 2009), but linearly increasing.

That is the overall percentage of bad debt increasing linearly, meaning accumulation of bad debt is accelerating faster than growth of "good" debt. This was also the case in the US mortgage crisis.

From this comment

1) It would be less of a concern if China had less liquidity while Chinese companies were also getting less access to liquidity. Shadow lending from wealth management product (WMPs) is a massive structural issue for the Chinese economy. When the underlying assets fail, you have a recession. It also means a centralized economy with lots of the downsides (bribes, joint ventures, etc.) but without the control.

2) American corporations believe there is tons of money to be made, but not many have been successful. In the event of a Chinese recession, those experiments will be vastly drawn back when Chinese consumers become pessimistic. In the event of an American correction, they'll pull back to invest in proven markets.

3) I haven't seen evidence that these ghost cities are the result of central planners building slack for expected growth.

4) Internal private debt (see 1) is a much larger problem. Most of that is owned by the central government, which means either a bailout when companies fail, continued lending until a bailout, or letting their economy correct.

Re: China's Subprime Crisis Is Here

#14

Post by necrodawg »

narrator wrote: post #9

Ahhh the old' China crisis again! The dog that didn't bark. The Charlie Brown football that never got kicked. The constant and unending crisis that is on its way any day now. As I have explained over the years in many previous comments, China's banking system is partially privatized central planning, the government prints it's own money. Thus, when there is a credit crisis the government just recapitalizes the banks…

I too have grown tired of shitty articles with shitty headlines that make some misunderstood argument on why China is about to have a bad time. It's at the point where I'm wondering if these publications are just fishing for clicks.

Re: China's Subprime Crisis Is Here

#16

Post by tyre »

themagician wrote: post #6
tim333 wrote: post #3

China's situation is a bit different to the US's in that given it's socialist leanings it will probably just keep lending and bailing out.

How is that different from the US situation? Isn't that exactly the US situation?

Yes, basically. Home owners were given mortgages they couldn't afford except under beyond-ideal circumstances. They then would refinance and take out other mortgages, until the whole house of cards came down.

The Saudis could maybe handle a situation like this, given their natural resources. As the current price of oil has shown, however, being rich in natural resources has its own issues.

The same principles apply across China, Saudi Arabia, and startups: at a certain point, you have to make money.

Re: China's Subprime Crisis Is Here

#17

Post by tmptmp »

obblekk wrote: post #7
dh997 wrote: post #4

Earlier quoted context omitted.

Isn't the bigger issues China's structural draconian limits to freer movement of capital, external investment, the imaginary/real value of ghost cities and scale of holding illiquid foreign debt?

One by one: 1. Freer movement of capital. This is a false herring in my opinion. Virtually no countries outside the US/EU offer completely free movement of money. The thing that matters is whether this prevents foreign capital investment (because people are scared of not being able to get their money back). In China, I don't think it does based on the last few decades of foreign investment. 2. External investment. As…

>>Are the same cities hanging around forever (and people complaining about them forever), or is it new stock every year?

I guess, googling "ghost cities in China" may bring out many interesting statistics about this. From the top links you get there one can fairly say that the "ghost cities" are in reality a biggish problem. Of course, we cannot get more complete picture just from these sites, but that is true for any communist regime: they will never allow any independent market study to happen in the first place.

Re: China's Subprime Crisis Is Here

#18

Post by obblekk »

tyre wrote: post #13
obblekk wrote: post #7

Earlier quoted context omitted.

One by one: 1. Freer movement of capital. This is a false herring in my opinion. Virtually no countries outside the US/EU offer completely free movement of money. The thing that matters is whether this prevents foreign capital investment (because people are scared of not being able to get their money back). In China, I don't think it does based on the last few decades of foreign investment. 2. External investment. As…

A few counterpoints. From your original comment > In addition, it doesn't seem like this rate is accelerating (since 2009), but linearly increasing. That is the overall percentage of bad debt increasing linearly, meaning accumulation of bad debt is accelerating faster than growth of "good" debt. This was also the case in the US mortgage crisis. From this comment 1) It would be less of a concern if China had less liqu…

Linearly increasing: True. I misread the axis. It still doesn't seem to have the form of something in a bubble or clearly unsustainable.

1. That's a fair point. But I suspect this has more to do with less developed capital markets in China than systematic weakness. I wonder if local supply of capital will be able to step up in the next American recession.

2. I think many have been successful in lowering their manufacturing costs. Not sure how an American correction would affect the Chinese economy.

3. Fair.

4. I'm generally skeptical of this argument. US corporations and households have maintained a high level of debt for more than 50 years without significant effect. I guess the Federal gov hasn't been the holder of that debt, but it actually seems better that way because they have the ability to print cash and add a stabilizing effect.

I guess my point is that none of these individually seem extreme enough to cause a problem. Maybe in aggregate there could be a storm.

Re: China's Subprime Crisis Is Here

#19

Post by [deleted] »

necrodawg wrote: post #14
narrator wrote: post #9

Ahhh the old' China crisis again! The dog that didn't bark. The Charlie Brown football that never got kicked. The constant and unending crisis that is on its way any day now. As I have explained over the years in many previous comments, China's banking system is partially privatized central planning, the government prints it's own money. Thus, when there is a credit crisis the government just recapitalizes the banks…

I too have grown tired of shitty articles with shitty headlines that make some misunderstood argument on why China is about to have a bad time. It's at the point where I'm wondering if these publications are just fishing for clicks.

[deleted]

Re: China's Subprime Crisis Is Here

#20

Post by prostoalex »

necrodawg wrote: post #14
narrator wrote: post #9

Ahhh the old' China crisis again! The dog that didn't bark. The Charlie Brown football that never got kicked. The constant and unending crisis that is on its way any day now. As I have explained over the years in many previous comments, China's banking system is partially privatized central planning, the government prints it's own money. Thus, when there is a credit crisis the government just recapitalizes the banks…

I too have grown tired of shitty articles with shitty headlines that make some misunderstood argument on why China is about to have a bad time. It's at the point where I'm wondering if these publications are just fishing for clicks.

The beauty of being a professional doomsayer is that people will remember one time you were right and forget the 99 times you were wrong. Then you can weave your career through books and TV shows that will pitch "the [only] expert who predicted X".

cf Peter Schiff, Meredith Whitney, Ron Paul.

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