China economy: 2012 and beyond7 March, 2012, 16:31. Posted by Zarathustra
This is part 1 of 5 in the series China Economy 2012 and Beyond
Regarding the China economy, it has defied doomsayers for 20 odd years. Many things that looked impossible at the time have become reality. So proud that some would say that China has almost abolished boom and bust.
That is, of course, ludicrous to say that the Chinese have mastered the way to control the economy. In fact, it has been shown in the last year that the Chinese government has pretty lost control over its housing market for the best part of last two years, and inflation was above target for 2011. Just because the government has control on bigger parts of the economy than Western countries by no means suggest that the economy can be manipulated.
I started becoming very pessimistic over China since late 2010, and even went so far to suggest shorting China. While China was still growing fast, which showed that my conjecture was wrong last year on the surface, investing in Chinese equities last year was pretty much a bad idea, and people who talked about shorting China a year or two ago are all coming closer to getting right. Also, even though the headline GDP figures still look good, many indicators are already showing weakness.
In fact, the Chinese economy is facing a lot of challenges, to say the least. Some of them have been pretty well-flagged, and some are probably ignored. Some see them as huge threats, while some others think the problems are manageable, or not a problem at all. Here, I would present the main views on various challenges. The key takeaway is that while no one can absolutely rule out the possibility that the problems will be resolved harmlessly, the probably is extremely slim, if not downright impossible.
I would first start to explore the demographic aspects of China, and will explore the consequences of the real estate bubble, and the debt behind the investment booms. Finally I would like to give some thoughts on rebalancing.
Series: China Economy 2012 and Beyond
- China economy: 2012 and beyond
- China Economy: 2012 and beyond (Part 1) – Demographics
- China Economy: 2012 and beyond (Part 2) – Real Estate Bubble
- China Economy: 2012 and beyond (Part 3) – Debts
- China Economy: 2012 and beyond (Part 4) – Rebalancing The Economy