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China’s Market Rout Is a Double Threat

nytimes.com

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Re: China’s Market Rout Is a Double Threat

#31

Post by WoodenChair »

sharetea wrote: post #2

China is in deep trouble; it has a total debt to GDP ratio of 282%, the highest compared to the other big gdp countries. ( http://bloom.bg/1evYSQ5 ). The housing bubble has already burst in the 3rd and 2nd tier cities in China, and the 1st tier cities are close to bursting. And the shanghai stock market is close to retracing back to 2000, since the current stock market has a p/e ratio that's 41% higher than that of U…

There's a lot of hyperbole in this post. The graph you link to of debt-to-GDP is actually very similar in China (282), South Korea (286), Australia (274), USA (269), Germany (258), and Canada (247). And for the record, South Korea's is higher than China's according to that graph. China's is more heavily weighted in "non-financial corporate" which is interesting.

And the shanghai stock market is not "close to retracing back to 2000." This graph shows, it's well above that: http://www.tradingeconomics.com/charts/china-stock-market.pn...

You're assuming both a continued free-fall at the same rates and also that p/e ratios in China mean the same thing as they did for .com companies in 2000 in USA. Any market newbie will tell you that what a "normal" p/e ratio is will differ greatly by sector even within the same economy. China's may be out of whack, but it's not fair to make an arbitrary comparison.

I'm no China apologist, but making predictions of 10-20 years of decline with an authoritative tone is wrong given the facts you presented.

Re: China’s Market Rout Is a Double Threat

#32

Post by sneak »

marincounty wrote: post #16
yishanl wrote: post #9

Earlier quoted context omitted.

I think there's a ton of economic incentive for the rich to leave China and move to the US. In fact, I'd argue it's happening now already, regardless of the performance of the Chinese economy. Some observations: - The luxury goods that the rich in China are looking for are much cheaper here in US. The international students I know at school go on insane shopping sprees at the Apple/Sony/Microsoft stores since how "ch…

I don't think anyone will respond out of fear of being labeled a -------? I will only comment on buying realestate in the U.S.? I believe realestate should only be bought by U.S. citizens. Right now all a foreigner needs is a individual tax number, and money. We have no real idea how that foreign money was obtained? Or, who cares? http://www.zillow.com/intl/en/foreign-buyers-guide/

"A foreigner". Why do you care where they were born? If where someone was born is so important to you, why not extend it down to the state level and only let people buy in the state in which they are issued papers from?

This is indeed thinly veiled nationalism/racism.

In a properly functioning society, you should have no real idea how the domestic money was obtained, either. It's none of your business as a seller.

Re: China’s Market Rout Is a Double Threat

#33

Post by adventured »

coenhyde wrote: post #6
sharetea wrote: post #2

China is in deep trouble; it has a total debt to GDP ratio of 282%, the highest compared to the other big gdp countries. ( http://bloom.bg/1evYSQ5 ). The housing bubble has already burst in the 3rd and 2nd tier cities in China, and the 1st tier cities are close to bursting. And the shanghai stock market is close to retracing back to 2000, since the current stock market has a p/e ratio that's 41% higher than that of U…

That is one outcome, assuming China tries to repay their debts. And as you are aware that hasn't worked out very well for Japan. If I was China and shit hits the fan, I would declare bankruptcy. It would hurt everyone but a shock like that probably has less chance of triggering a revolution than 20 years of decline.

In the case of both Japan and China, most of their debt is held internally.

That's why Japan is debasing the Yen, instead of performing a traditional default. They're unable to afford their debt, but if they just outright default, that will hammer their economy in one big hit - the creditors are the Japanese people. The Yen debasement hits them as well, and reduces the real value of the debt, but the premise is it's a gradual process they can adjust to over time (and the politicians get to lie about what's happening, another reason they all universally prefer inflationary schemes).

Re: China’s Market Rout Is a Double Threat

#34

Post by yishanl »

azinman2 wrote: post #27
yishanl wrote: post #9

Earlier quoted context omitted.

I think there's a ton of economic incentive for the rich to leave China and move to the US. In fact, I'd argue it's happening now already, regardless of the performance of the Chinese economy. Some observations: - The luxury goods that the rich in China are looking for are much cheaper here in US. The international students I know at school go on insane shopping sprees at the Apple/Sony/Microsoft stores since how "ch…

There are various currency controls that do make it hard to get money out of the country. Clearly it's possible, but if this starts happening in mass just watch as the top leadership makes that essentially impossible.

Sadly don't think it's stopped anyonw. Friend told me it's 50,000/person at any one time, but given the amount of money I've seen being being spent, I doubt that is stopping anyone.

Going to dig into if there are any loopholes for this. I think it's fascinating how so many people in China suddenly became self-made millionaires/billionaires + can spend that money so extravagantly in the US without much consequence.

There was a classmate from China last semester who came to class every day in a new custom sports car. Mondays was Lambourghinis, Tuesdays was R8, Wednesday was McLauren, Thursday was wrapped Panamera turbo, etc. And this kind of spending/demographic is pretty noticeable in Boston/Allston.

Re: China’s Market Rout Is a Double Threat

#35

Post by adventured »

smil wrote: post #30
joosters wrote: post #25

Earlier quoted context omitted.

But you're implicitly making a prediction or an assumption here, namely that there has been a correction. That there has been a correction. Are you sure that the market won't fall another 30% in the coming weeks?

You're implicitly making a prediction here. Are you sure that the market will fall in the coming weeks?

Something that goes up for no good reason (spurred by margin), will come back down for a very good reason: it should have never been up there to begin with.

Whether it's a week, a month, or a year, their market is going a lot lower yet. It'll retrace back to where it was, no matter what the central government does today. Trillions of dollars in real wealth will be lost in the debacle, as the event sets off dominoes.

Re: China’s Market Rout Is a Double Threat

#36

Post by tomp »

Animats wrote: post #4

The chart in that article is grossly deceptive. It shows only the last six months of the Shanghai index. Here are the past ten years.[1] That tells you a lot more. For one thing, that index hasn't come back to its 2008 high. That's more significant than the current correction. [1] http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"r...

The other interpretation (that I stole from ZeroHedge) is that a collapse of the Shanghai index will again correlate with the collapse of the US markets.

Re: China’s Market Rout Is a Double Threat

#37

Post by adventured »

danmaz74 wrote: post #23

From what I understood, the biggest problem is that lots unsophisticated investors (families) invested when the prices were already up, as it usually happens with bubbles, and now they are in deep trouble. This in turn could create big troubles in the "real economy".

That was intentional on the part of the Chinese government. They haven't been subtle about it.

Chinese households are the only sector with a healthy balance sheet. Their corporations are carrying epic amounts of debt in relation to GDP. The premise was to transfer wealth from households to corporations, to improve the corporate balance sheets (via share issuance).

Re: China’s Market Rout Is a Double Threat

#38

Post by sharetea »

WoodenChair wrote: post #31
sharetea wrote: post #2

China is in deep trouble; it has a total debt to GDP ratio of 282%, the highest compared to the other big gdp countries. ( http://bloom.bg/1evYSQ5 ). The housing bubble has already burst in the 3rd and 2nd tier cities in China, and the 1st tier cities are close to bursting. And the shanghai stock market is close to retracing back to 2000, since the current stock market has a p/e ratio that's 41% higher than that of U…

There's a lot of hyperbole in this post. The graph you link to of debt-to-GDP is actually very similar in China (282), South Korea (286), Australia (274), USA (269), Germany (258), and Canada (247). And for the record, South Korea's is higher than China's according to that graph. China's is more heavily weighted in "non-financial corporate" which is interesting. And the shanghai stock market is not "close to retracin…

My reason for saying 10-20 years was based on the similarity of Japan in 1990 and China today. That is, they're both exporting country that has an aging demographic which likes to save, has a small consumer base compared to export, and is losing export share as production moves out of country to other cheaper countries. And they both choose to save the banking system instead of letting it self correct.

Re: China’s Market Rout Is a Double Threat

#39

Post by joosters »

smil wrote: post #30
joosters wrote: post #25

Earlier quoted context omitted.

But you're implicitly making a prediction or an assumption here, namely that there has been a correction. That there has been a correction. Are you sure that the market won't fall another 30% in the coming weeks?

You're implicitly making a prediction here. Are you sure that the market will fall in the coming weeks?

Nope, that's not what I said.

Re: China’s Market Rout Is a Double Threat

#40

Post by vikiomega9 »

sneak wrote: post #32
marincounty wrote: post #16

Earlier quoted context omitted.

I don't think anyone will respond out of fear of being labeled a -------? I will only comment on buying realestate in the U.S.? I believe realestate should only be bought by U.S. citizens. Right now all a foreigner needs is a individual tax number, and money. We have no real idea how that foreign money was obtained? Or, who cares? http://www.zillow.com/intl/en/foreign-buyers-guide/

"A foreigner". Why do you care where they were born? If where someone was born is so important to you, why not extend it down to the state level and only let people buy in the state in which they are issued papers from? This is indeed thinly veiled nationalism/racism. In a properly functioning society, you should have no real idea how the domestic money was obtained, either. It's none of your business as a seller.

Is nationalism a bad thing? (Required reading is much appreciated.)
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