The Short View: Chinese bubble

FT ^ | 03/12/08 | John Authers

[TigerLikesRooster]

The Short View: Chinese bubble

By John Authers, Investment Editor

Published: March 12 2008 17:47 | Last updated: March 12 2008 17:47

As the year turned, the world’s fears were invested in the US. All its hopes were turned to China. That has changed.

Anxiety about China has suddenly spiked. This is partly because the bubble in its domestic equity market has burst. The Shanghai Composite is down 31.6 per cent from its October peak – more than the Nasdaq Composite had dropped at the same stage after the tech bubble burst. Hong Kong-quoted H-shares and New York-quoted ADRs are down a bit less, but still by more than 20 per cent.

PetroChina, the biggest Chinese company, has fallen by half since its November peak.

These falls demonstrate that the Chinese market is not as insulated from the rest of the world as had been hoped. More to the point, investors are also responding to evidence that its economy is prone to international pressures.

Inflation, at 8.7 per cent, is its highest in more than a decade. To an overheating economy have been added the effects of high global agricultural prices and the effects of China’s bad winter. With food accounting for about a third of consumer expenditure, it is a problem that cannot be ignored.

Then there are August’s Beijing Olympics. Until the last few weeks, they were regarded as a guarantor that China’s economy would not be allowed to slow down. Now, there are concerns that closing factories, in a bid to improve air quality, will depress industrial production.

The events of the past few weeks have not much changed the long-term case for China. But, in combination with the bursting of the Shanghai bubble, they have been enough to turn perception around. Suddenly, China is viewed through the prism of what could go wrong. Its growth is no longer a given.

As the Olympics approach, that adds another source of uncertainty for global markets. As if they did not have enough to worry about.

[TigerLikesRooster]

Decoupling is a wishful dream cooked up by international financial community, based on shaky rationale. It offered them the rather unrealistic hope that they can hop from one boom spot to another making money uninterrupted, escaping painful bust for good.

All ridiculous dreams come to an end.

[TigerLikesRooster]

Ping!

[CarrotAndStick]

Where are those commies now?

:^)

[redstateconfidential]

[FoxInSocks]

Then there are August’s Beijing Olympics.

I honestly believe this next Olympics is going to be a big flop. A fiasco. I don't foresee world records in any outdoor events.

Now, there are concerns that closing factories, in a bid to improve air quality, will depress industrial production.

They probably should have closed them years and years ago, if they wanted breathable air. Or not even built them in the first place. The pollution in China is gross.

[TigerLikesRooster]

China could have saved all these unwanted publicity by not pursuing Olympic bid. Their timing is really premature.

[ARE SOLE]

China could have saved all these unwanted publicity by not pursuing Olympic bid. Their timing is really premature.

Not if they think it's 1936.

Regards

[TigerLikesRooster]

If Chinese regime is emulating Nazi regime of Germany, it will be sorely disappointed to find that they achieved much less than Nazis did with their Olympics.

[zeestephen]

The Chinese economy is built on one simple idea:

Sell manufactured goods to Europe, Japan, and the USA.

When consumer demand goes down in the developed world, China’s economy will feel serious pain.

[familyop]

The China yuan renminbi is just a hair over 14 cents on the dollar and going up, and some of our US importers are showing insanity through media sponsorships. Considering the miseries of house buyers who lost money, the price of oil and the prices of grains, though, the US economy is not very bad at all.

[familyop]

"More neckties for the people. We love WildTies!"

That image is a humorous and excellent representation of what's going on over there. China has its own consumers now, too.

[max americana]

The Olympics are successful ONLY when the events are being played. There have been evidence that the facilities become white elephants and boondogles once the events are finished.

As usual, the USA are always the top 1 or 2 when it comes to medal counts so no worries there. I also expect our country to be booed like 2004, but we racked up the medal count faster than Hugh Hefner racks up groupies at the mansion.

[MimirsWell]

Just one problem with Chinese consumers...most of the upper middle class in China (the neck tie and desginer goods consumers) are either corrupt CCP workers and their families or they are industrialists whose factories export to the west.

At the very least, the second group won’t go shopping anytime soon. They took their first big hit when the chinese new year snow storms destroyed production schedules...a lot of factories are yet to recover to full production levels.

That leaves the CCP stooges...lets ask our Chicom friends on the boards what their shopping plans are like

Paging Steelboy, cmdjing, ponderlife!

[MimirsWell]

I am not sure if the timing was bad...its just that they managed to mess everything up by using the Olympics to stir up nathionalism. So many promises have been made to the Chinese people. Every Chinese that I have spoken to expect millions to attend the Olympics and “witness” China’s splendor. In the past, attendance at the Olympics outside of the participants and their families have been a few thousand. Even if with all the hype the attendees double, it will likely fall well short of a hundred thousand.

Cities like Barcelona witnessed a bubble that just deflated after the Olympics. I don’t think there’s anyone in China who even imagines that for Beijing. It may well not be so, but the CCP will have millions of people who re expecting to get rich over night and witness the onset of the golden age of China right after the Olympics...a tall story in my opinion. You just have to look at the spike in real estate prices in Beijing in this past year to get a pulse of what the people expect this will turn out like. There will be a mess...and the Chinese will need something else to keep them entertained once the Olympics is over.

[TigerLikesRooster]

the Chinese will need something else to keep them entertained

Imperialist Running Dogs bent on denying the China its rightful place in the world are supposed to provide it.:-)

[MimirsWell]

http://www.etoa.org/Pdf/Press_etoa_olympic_report1.pdf

A very god article on the effect of Olympics on tourism :)

[MimirsWell]

hehehehe! You bet! And when it all fails, it will be Taiwan’s fault and Japan’s and India’s. We will see who “will be pay”! :)

[texas booster]

Paging ya’ll over to an interesting discussion about the Olympics.

Or more accurately, AFTER the Olympics.

I wonder if we could see very bad times for the Chinese if the US hits a recession (Dumbocrats win the election). If the US has troubles, then Europe will be too weak and inefficient to carry on, and China's manufacturing base is now empty factories.

[thulldud]

Now, there are concerns that closing factories, in a bid to improve air quality, will depress industrial production.

But, but, I thought that Chinese factories couldn't pollute! (By definition, at that!)

[ponder life]

I wonder if we could see very bad times for the Chinese if the US hits a recession (Dumbocrats win the election). If the US has troubles, then Europe will be too weak and inefficient to carry on, and China's manufacturing base is now empty factories.

Bad times maybe ahead. No country has ever grown in a persistently upward line. There will undoubtedly be dips along the way. Corrections will occur and China is no exception. In the long term though, growth will continue, with or without the Olympics.