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China's Economy Goes From Boom To Bust


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They won't go bust the way we did.....a few central reasons, one is the shear numbers of people mobilizing themselves into the middle class whereas the u.s and Europe for the most part had already been maxed out.

 

The main reason however, is one key word ...... Leverage

 

 

Even though chinas property values in certain coastal cities are overvalued, they haven't operated with nearly the leverage they did with in the rest of the western world....we had many home loans with less than 5 percent down whereas chinas average down payment is closer to 40 percent....which means if people go upside down on their loans they won't let it go.....meaning that they won't see that vicious circle of home price erosion of home foreclosures further bashing prices lower....also one of the few advantages of state owned banks specially with the huge cash reserves that china has that none of these banks will go under.

 

China will not stay below a 6% GDP rate for a sustained period for one simple reason...it would cause such social unrest that they wouldn't dare allow that to happen and since they are able to implement stimulus programs with such efficiency because of the lack of beauracratic channels and hurdles to put t Hesse projects in motion, you won't see them stay at those unacceptably low growth levels.

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WSJ: China's Hard Landing | The state-led growth model is leading the country into trouble

 

Most analysts expected monetary easing to start next year when inflation had subsided further. But then most China analysts were predicting a "soft landing" for the economy. The data in recent days suggest the stagflation trend will continue and the landing may be bumpy.
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