Money and Finance
- Jim Grant: The World Has Never Seen The Likes Of China’s Credit Frenzy
Via ValueWalk:HERETOFORE UNIMAGINED The world has never seen the likes of China’s credit frenzy. From year-end 2008 through the third quarter of 2013, assets on the balance sheets of Chinese banks grew by $15.1 trillion to $24.3 trillion. That growth...
- Morningstar Q&a With Ben Inker
Inker: The behavior of corporate profits in the U.S. for the last 10 or 15 years is weird. It doesn't follow a standard capitalist script. If you've got a situation where there is a very high return on capital, which there has been on average...
- China Set To Continue Supersize Binge - By Edward Chancellor
It is easy to see why Chinese premier Wen Jiabao is calling for a “greater emphasis on growth”. China’s property market is stressed and the country’s main export market, Europe, is contracting. Several economic indicators, including electricity...
- How Do We Know That China Is Overinvesting? - By Michael Pettis
Of course the question of whether or not China is misallocating capital can be endlessly debated because it is very hard to prove except in retrospect. I would argue that there are several reasons why we should believe that capital has been wasted on...
- Building Boom In China Stirs Fears Of Debt Overload
WUHAN, China — In the seven years it will take New York City to build a two-mile leg of its long-awaited Second Avenue subway line, this city of nine million people in central China plans to complete an entirely new subway system, with nearly 140 miles...
Money and Finance
Stan Druckenmiller on China
Found via ValueWalk.
Stan Druckenmiller: The growth in credit at a time when GDP growth is slowing is a problem for China. And I think this is the 2009-11 stimulus coming back to bite. I understand that it had to be done to fund entrepreneurs and the private sector, but it’s easier said than done if you’re channelling funds through local government investment vehicles. I’m a believer in markets. A few men sitting around a table and deciding how to allocate capital goes against everything I’ve ever believed. Not only are they not great at capital allocation, such an exercise also needs to deal with a lack of property rights and corruption. In essence, the frantic stimulus China put together at the end of 2008 sowed the seeds of slower growth in the future by crowding out more productive investments. And now, the system’s building enough leverage and misallocation of resources to warrant risks of a financial crisis, but the timing of that is still uncertain in my mind. What we’ve seen in China since 2009 is similar to what happened in the US in 2005, in terms of credit growth outpacing economic growth.
I think ageing demographics is a bigger issue in China than people think. And the problems it creates should be become evident as early as 2016.
You also need to keep in mind that for China to grow and evolve further, it will need to compete with a more innovative Korea and now a more competitive Japan. I don’t think China can do that with where its exchange rate is today. I think productivity is a key concern too. And I think that could be one of the reasons why the US has been so supportive of Abenomics.
People mention lack of infrastructure as a constraint. But when I go over there, it looks like they have a lot of infrastructure. It seems ahead of the population, not behind. I see expensive apartments in empty cities that 300 mn rural Chinese are expected to migrate to. That looks very unbalanced to me. Nobody’s ever had investment to GDP at 47%. Japan and Korea peaked at 36%-38%, so as a result I think capacity is way ahead of demand in some areas in China.
- Jim Grant: The World Has Never Seen The Likes Of China’s Credit Frenzy
Via ValueWalk:HERETOFORE UNIMAGINED The world has never seen the likes of China’s credit frenzy. From year-end 2008 through the third quarter of 2013, assets on the balance sheets of Chinese banks grew by $15.1 trillion to $24.3 trillion. That growth...
- Morningstar Q&a With Ben Inker
Inker: The behavior of corporate profits in the U.S. for the last 10 or 15 years is weird. It doesn't follow a standard capitalist script. If you've got a situation where there is a very high return on capital, which there has been on average...
- China Set To Continue Supersize Binge - By Edward Chancellor
It is easy to see why Chinese premier Wen Jiabao is calling for a “greater emphasis on growth”. China’s property market is stressed and the country’s main export market, Europe, is contracting. Several economic indicators, including electricity...
- How Do We Know That China Is Overinvesting? - By Michael Pettis
Of course the question of whether or not China is misallocating capital can be endlessly debated because it is very hard to prove except in retrospect. I would argue that there are several reasons why we should believe that capital has been wasted on...
- Building Boom In China Stirs Fears Of Debt Overload
WUHAN, China — In the seven years it will take New York City to build a two-mile leg of its long-awaited Second Avenue subway line, this city of nine million people in central China plans to complete an entirely new subway system, with nearly 140 miles...