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Beijing struggles to defuse anger over China's P2P lending crisis

reuters.com

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Re: Beijing struggles to defuse anger over China's P2P lending crisis

#51

Post by seanmcdirmid »

vkou wrote: post #34
tonyedgecombe wrote: post #19

Earlier quoted context omitted.

The more they artificially sustain that market the harder the crash will be. It will be painful but I still hope something like that would create democratic reforms.

The markets in the US, following 2008, were artificially sustained, too. How hard will they crash?

The US was allowed a crash at least. As for how much we will pay for low interest rates later, I'm sure it will be something bad in the next crash.

China has kept pumping up its bubble unreasonably so since the mid-2000s. It has a third-world problem compared to the USA's first-world one.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#52

Post by jgowdy »

sremani wrote: post #30
SuoDuanDao wrote: post #24

Earlier quoted context omitted.

I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the re…

>> always goes to busy restaurants on the assumption that a lot of customers means they have good food. It is actually good heuristic, I would just modify it ever slightly.. lot of customers means that they will not serve "stale" or yesterday's food.

I agree with this being a valuable heuristic. Not for whether or not the food tastes delicious in terms of seasoning or flavor, but are they moving product. It’s easier to think of it in terms of a butcher shop. You don’t want to buy meat from a butcher shop that gets few customers (yes exceptions for boutique expensive butcher shops). You want the busiest butcher shop you can find that meets your other parameters. It’s only one factor, but I consider it a rather important one.

I’ve seen too many episodes of Kitchen Nightmares and similar shows to take a chance on a low volume restaurant that isn’t low volume due to an intentional design decision.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#53

Post by bobthepanda »

baybal2 wrote: post #11
atr_gz wrote: post #6

Earlier quoted context omitted.

The government, including Li Keqiang, was officially promoting this industry a few years ago. The government also tightly controls the flow of information in China, keeping people from seeing alternate opinions. In addition to that, tight currency controls mean the middle class is starved for worthwhile investments. I don't know whether these people should be bailed out or not (the companies definitely shouldn't be),…

>In addition to that, tight currency controls mean the middle class is starved for worthwhile investments. But that is kind also the only reason China is not completely sank in the saving glut. They want to make it appear to people that they have no better alternative to use their money than just spending it right away. This is one of reasons that a thing as bizarre as that bitcoin took off her. In reality, Chicoms h…

The problem is that China's economy is based on keeping the genie in the bottle. The moment they let it out, all hell will break loose, and it'll be 1998 all over again.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#54

Post by cm2187 »

tonyedgecombe wrote: post #19
seanmcdirmid wrote: post #18

Earlier quoted context omitted.

They’ve done well on real estate. The government would never let the real estate sector crash, the bubble must be maintained at all costs, or at least the landing must be soft. Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.

The more they artificially sustain that market the harder the crash will be. It will be painful but I still hope something like that would create democratic reforms.

Actually the europeans are following a similar logic. Try to cushion the pain, amortize it over a long period, hope the problem goes away by itself. You end up 10 years after the financial crisis with an unhealthy banking sector, high unemployment, etc. So it doesn't have to crash but you basically end up having to live with the problem instead of fixing it. The US approach of taking the pain upfront and starting clean works better in the long run in my opinion.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#55

Post by seanmcdirmid »

cm2187 wrote: post #54
tonyedgecombe wrote: post #19

Earlier quoted context omitted.

The more they artificially sustain that market the harder the crash will be. It will be painful but I still hope something like that would create democratic reforms.

Actually the europeans are following a similar logic. Try to cushion the pain, amortize it over a long period, hope the problem goes away by itself. You end up 10 years after the financial crisis with an unhealthy banking sector, high unemployment, etc. So it doesn't have to crash but you basically end up having to live with the problem instead of fixing it. The US approach of taking the pain upfront and starting cle…

I think the Japanese perfected that approach with their lost decade.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#56

Post by jjcc »

SuoDuanDao wrote: post #24
21 wrote: post #14

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jp...

I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the re…

your description about the average Chinese mental feature might be right. But the restaurant example is not correct. Maybe a little off topic. I'm a Canadian Chinese my self. I learned hard lessons within Canada so I will likely to choose busy restaurant. In China there might have long queues for special brand food from some unique restaurant but usually people don't wait for dinner or lunch. Average Chinese are impatient just like average American. When they expect waiting for a casual lunch, most of time they will turn around to find next restaurant because there are countless attractive options.

Canada in general is a slow country and restaurant market is not competitive with exceptions of a couple of big cities. Waiting is normal for Canadian. In early times, being impatient I've made many wrong choices by turning around to find a less busy restaurant which always led to terrible experience without exception. Before I made wrong choices I was thinking that how those busy restaurants can survive by treating their customers so badly to let them wait in hunger. It turned out that alternatives were always worse. In China both are likely to be replaced by competitors very quickly with better services. In Canada both survived for long time. Differently market ecology. So I leaned to choose the less evil of them

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#57

Post by cm2187 »

_ptgt wrote: post #40
rb808 wrote: post #21

Earlier quoted context omitted.

Its fascinating to think about the knowledge of investors in China. How should people know how to invest sensibly if none of their parents or grand parents ever were able to own any such assets (because of poverty and communism) Combined with Chinese people all saving too much and not spending on consumption - there is a huge pool of money just floating around going into every possible asset. Its a bad combination th…

This is getting downvoted (perhaps due to the rough tone) but there's a lot of truth to it. It's part of a larger phenomenon that isn't limited to investing as well. I think a lot of inexperienced outside observers of China from developed countries tend to miss that while some parts of China now have many of the trappings of developed nations, the rapid pace with which China has evolved means that they lack a lot of…

There is also a lot of institutional knowledge missing. The US knows since the 1929 crash that it is very dangerous to let retail investors buy stocks on margin and there are very strict rules to limit that. I understand buying stocks on margin was common for retail investors in China and greatly contributed to the volatility of the Chinese stock market.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#58

Post by maxxxxx »

rhino369 wrote: post #49
maxxxxx wrote: post #23

Earlier quoted context omitted.

"bailout or the catastrophic collapse of the world " In 2008 this is what the bankers told us but are these really the only options? I have my doubts.

The panic and economic damage from just Lehman Brothers failing shows that the fear was reasonable. Finance is as important as energy, communications and food to the global economy. I think the key is just making sure the bail out hurts nearly as much as actual bankruptcy.

I agree with you but there was a lot of talk about other approaches like nationalization but they got shot down quickly so the only path left was what the bankers wanted. I still find it hard to believe that the people that ran their banks into the ground walked away with hundreds of millions of dollars.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#59

Post by jack9 »

Sangermaine wrote: post #39
sremani wrote: post #30

Earlier quoted context omitted.

>> always goes to busy restaurants on the assumption that a lot of customers means they have good food. It is actually good heuristic, I would just modify it ever slightly.. lot of customers means that they will not serve "stale" or yesterday's food.

>It is actually good heuristic No it's not. It assumes there's a correlation between quality and customers, or at least that quality is a prime cause of customers. But there's no reason to think that's the case. In fact, it's more likely that location is the prime factor: the restaurants in Times Square in NYC are very busy, but they are by no means the best in the city or even particularly good. They just have great…

The vast majority of america does not have such a bias toward location. It's makes a good heuristic, in america. It's not surprising when there's exceptions.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#60

Post by westiseast »

SuoDuanDao wrote: post #24
21 wrote: post #14

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jp...

I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the re…

One thing worth bearing in mind about the restaurant analogy:

The life cycle of restaurants in China is often very short - they open with investment and fanfare. They’ll have a great chef on board, a new and interesting signature dish, good ingredients, new equipment and high standards. After 6 months, all going well, the investors have made back their money. After 12 months, the profit has been made and the owners might look to sell. After 18 months, the place has beeen sold at an inflated price and the new owners will cut costs and quality to squeeze as much money as possible out of the place for its remaining lifespan.

So, a crowd of people means the place is new and quality is still high. No crowd means it’s either just crap quality, or it’s towards the end of its life cycle and quality has dropped.

Someone else can tenuously try relate that to Chinese investment psychology :)

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